Question: APPENDIX KEY QUESTION Using Figure A7-4, explain why the point of tan gency of the budget line with an indifference curve is the consumers equilibrium

APPENDIX KEY QUESTION Using Figure A7-4, explain why the point of tan gency of the budget line with an indifference curve is the consumer’s equilibrium position.

Explain why any point where the budget line intersects an indifference curve is not equilib rium. Explain: “The consumer is in equilib 12 6

8 8 2 4 24 rium where MRS = PB/PA.”

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