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If at the current consumption bundle where all income is spent, the slope of the indifference...

If at the current consumption bundle where all income is spent, the slope of the indifference curve at this bundle is steeper than the slope of the budget line, and X is on the horizontal axis

a. the consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices.

b. MRS < PX /PY.

c. MRS = - PX /PY.

d. the consumer is willing to give up more of good X to get an additional unit of good Y than is necessary under the current market prices.

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Answer #1

The answer is a.

a. the consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices.

The MRS is the slope of the indifference curve and Px/Py is the slope of the budget constraint.This means that the marginal rate of substitution is higher than the ratio of the price of x to the price of y.The marginal utility per dollar spent on good X is greater than the marginal utility per dollar spent on good Y.

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