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JAMB Economics 2011 Paper

Question : 9

Total: 49

When a consumer is at equilibrium, the MRS_xy is equal to the

Solution:

Concept:

At consumer equilibrium, the marginal rate of substitution equals the price ratio of the two goods.

Explanation:

The consumer is at equilibrium when:

MRS_{xy} = \frac{MU_x}{MU_y} = \frac{P_x}{P_y}

This means

MRS_{xy}

equals the ratio of the two prices.

Answer:

C. ratio of the two prices

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