Budget constraints and optimal choice Flashcards
1
Q
What is consumer expenditure constrained by?
A
- Prices
- Income
2
Q
What does the tangency point mean?
A
It’s a unique point that maximises the consumers utility
3
Q
What is an interior solution?
A
Consumer buys positive quantities of each good
4
Q
If MRS
A
All money is spent on good x
5
Q
If MRS>MRT then…
A
All money is spent on good Y
