Question

Write true or false with a reason:

When $MR{S}_{XY}<\frac{P_X}{P_Y}$, the consumer reaches the point of equilibrium only when the consumption of $X$ increases and of $Y$ decreases.

• A. True
• B. False

Answer 1

The correct option is B False

When $MR{S}_{XY}<\frac{P_X}{P_Y}$, the consumer should consume more of $Y$ in place of $X$ to reach the point of equilibrium. It is only then that $MR{S}_{XY}$ increases and becomes equal to price ratio.