(Answered) Question in the context of an indifference curve and budget

Management Studies

Question: In the context of an indifference curve and budget constraint diagram, carefully explain why we generally expect the marginal rate of substitution between two goods to be equal to the ratio of their prices.

Comment: The slope of the indifference curve is the marginal rate of substitution (or the rate at which a consumer is willing to trade one good for the other to remain equally well off) and the slope of the budget constraint is the ratio of the prices.

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