Question 58
MediumOriginal questionMatch each item with what it measures or shows.
| List I | List II |
|---|---|
| A. Slope of the budget line | I. The most of good 1 the income can buy, M ÷ P₁ |
| B. Slope of an indifference curve | II. The price ratio P₁ ÷ P₂ |
| C. Intercept of the budget line on the good-1 axis | III. The consumer's optimum |
| D. Point of tangency | IV. The marginal rate of substitution |
Show the answer and explanation
CorrectNot quiteAnswer C
Correct answer: C
Explanation
The budget line's slope is the market rate, P₁ ÷ P₂; the indifference curve's slope is the MRS.
The good-1 intercept is M ÷ P₁, and the tangency marks the optimum.
- Concept
- Budget line and indifference curve terms
- Typical timeTypical
- 90 s
- Your timeYours
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