Question

For a stable consumer's equilibrium of MRSxy must be ______.

Options

• constant

• diminishing

• increasing

• none of the these

Answer 1

For a stable consumer's equilibrium of MRSxy must be diminishing.

Explanation:

At the same time, MRSxy should be decreasing at the equilibrium, i.e., the IC curve should be convex to the origin. This will enable the consumer to attain stable equilibrium.