Which of the following is true?
A) Indifference curves may intersect.
B) At a point of consumer equilibrium, the MRS always equals 1.
C) If income increases, a consumer will always consume more of a good.
D) None of the preceding statements is correct.

Question

Quizplus · Accepted Answer

Indifference curves cannot intersect as this would violate the assumption of consistent preferences. The MRS (Marginal Rate of Substitution) at the point of consumer equilibrium does not always equal 1; it equals the price ratio of the two goods. An increase in income does not guarantee that a consumer will consume more of a good, as the good could be an inferior good, where consumption decreases as income increases.

Which of the Following Is True