Question : Statement 1: Consumer equilibrium can occur when the marginal rate of substitution is equal to the relative price of goods.
Statement 2: The marginal rate of substitution measures the rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Correct Answer: Both statement 1 and statement 2 are true.
Solution : The correct answer is (c) Option C: Both statement 1 and statement 2 are true.
Statement 1 is true. Consumer equilibrium occurs when the marginal rate of substitution (MRS) is equal to the relative price of goods. This means that the consumer is willing to give up a certain amount of one good in exchange for an additional unit of another good at a rate equal to the price ratio.
Statement 2 is also true. The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction. It represents the amount of one good that a consumer is willing to give up in exchange for an additional unit of another good while keeping utility constant.
Related Questions
Trending Articles/News
