URGENT In 3 slide of Lesson 2 at last why at point B (MRS >P1/P2) why not (MRSP1/P2)?I don't want reason I want why it is so?
MRS is the slope of IC and the price ratio is the slope of budget line. Now, at point B, locate which one of the two is above the other? I mean which one is above- is it IC or budget line? You will nod your head in favour of IC and that is exactly the reason why we say MRS > Price ratio. The IC is above the budget line depicts that slope of IC is higher than the slope of the budget line at point B.
On the other hand, repeat the same practice for point C. Which one of the two is above? Is it IC or the budget line? Definitely, it is the budget line. Hence, at point C, the slope of the budget line is more than the slope of IC. This is what we represent mathematically, as MRS < Price ratio.
I believe it should be clear now, if still you have any doubt, then do let us know.
On the other hand, repeat the same practice for point C. Which one of the two is above? Is it IC or the budget line? Definitely, it is the budget line. Hence, at point C, the slope of the budget line is more than the slope of IC. This is what we represent mathematically, as MRS < Price ratio.
I believe it should be clear now, if still you have any doubt, then do let us know.