A consumer chooses an optimal consumption point where the
A)marginal rate of substitution exceeds the relative price ratio.
B)slope of the indifference curve equals the slope of the budget constraint.
C)ratio of the prices equals one.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The optimal consumption point is where the consumer reaches the highest level of satisfaction within their budget constraint. This means that the slope of the indifference curve (the rate at which the consumer is willing to trade one good for the other) and the slope of the budget constraint (the relative price ratio) are equal. Therefore, B is the correct choice. A is incorrect because the marginal rate of substitution may or may not exceed the relative price ratio at the optimal point, depending on the consumer's preferences. C is also incorrect because the ratio of the prices being one is not a necessary condition for an optimal consumption point.

A Consumer Chooses an Optimal Consumption Point Where the