Question

Good Y is on the vertical axis and good X is on the horizontal axis. If the slope of the indifference curve is steeper than the slope of the budget line then:

• MRS < −P_X/P_Y.

• the consumer is willing to give up more of good Y to get additional units of good X.

• MRS < P_X/P_Y.

• the consumer’s utility is maximized.

• the consumer is willing to give up more of good X to get an additional units of good Y.

Answer 1

We know slope is change in Y/change in X

skope of Indifference curve is MRS and steeper the curve, more slope it has.

Thus slope of IC=MRS>Slope of Budget Line

Thus MRS>Px/Py

MRS is the number of units of Y sacrificed to gain an additional unit of X

Thus consumer is willing to give up more of good Y to get an additional unit of X

Thus ans is B

Answer 2

MRS- MUL MRS C Prc MU MUx Poe

It means that the consumer is getting more satisfaction from consuming good y as compared to good x. So, the consumer starts consuming more of good y and less of good x.