Which of the following equations corresponds to an optimal choice point? (i) MRS = P_X/P_Y (ii) MU_X/MU_Y = P_X/P_Y (iii) MU_X/P_X = MU_Y/P_Y (iv) MU_X/P_Y = MU_Y/P_X A)(i) only B)(i), (ii), and (iii) only C)(ii) and (iv) only D)(i), (ii), (iii), and (iv)

Question

Quizplus · Accepted Answer

The optimal choice point in consumer theory is where the marginal rate of substitution (MRS) equals the price ratio, which is represented by (i) and (ii). Equation (iii) is another form of expressing the same condition using marginal utilities and prices. Equation (iv) is incorrect as it does not represent the optimal consumption condition.

Which of the Following Equations Corresponds to an Optimal Choice