Question : Statement 1: Consumer equilibrium can occur when the marginal rate of substitution is equal to the relative price of goods.
Statement 2: The marginal rate of substitution measures the rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Correct Answer: Both statement 1 and statement 2 are true.
Solution : The correct answer is (c) Option C: Both statement 1 and statement 2 are true.
Statement 1 is true. Consumer equilibrium occurs when the marginal rate of substitution (MRS) is equal to the relative price of goods. This means that the consumer is willing to give up a certain amount of one good in exchange for an additional unit of another good at a rate equal to the price ratio.
Statement 2 is also true. The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction. It represents the amount of one good that a consumer is willing to give up in exchange for an additional unit of another good while keeping utility constant.
Question : Statement 1: The slope of the budget line represents the relative price of two goods.
Statement 2: The consumer achieves equilibrium when the marginal rate of substitution is equal to the relative price of the goods.
Question : Statement 1: The consumer achieves equilibrium when the marginal utility per dollar spent is equal for all goods.
Statement 2: At equilibrium, the consumer maximizes their total utility within the constraints of their budget.
Question : Statement 1: The concept of consumer equilibrium assumes that the consumer has perfect information about prices and product attributes.
Statement 2: The consumer's equilibrium is based on rational decision-making and the pursuit of maximum satisfaction.
Question : Statement 1: A consumer achieves equilibrium by consuming equal quantities of all goods.
Statement 2: The concept of consumer equilibrium assumes that the consumer's goal is to maximize their total utility.
Question : Statement 1: The concept of consumer equilibrium can occur at multiple points of tangency between the budget line and indifference curves.
Statement 2: The consumer can achieve the same level of utility by choosing different combinations of goods that are equally preferable.
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