Answer to Question #148315 in Microeconomics for Kawshik Azad

Question

explain with the help of diagram when tangency is only a necessary condition and when is it both a necessary and sufficient condition?

Answer 1

There is one important case where tangency is sufficient, the case of convex preferences. The ideal point of convex selection should be any point which satisfies the condition of the tangencies. In general, as shown below, more than one optimal package that satisfies the MRS condition can be generated:

There are three tangential conditions in this case, but only two optimal points are required, but the tangential conditions are not sufficient. However, convexity is another constraint. If the curves of indifference are strictly convex, each budget line has only one optimal alternative. It should be remembered that the marginal exchange rate is the exchange rate which the buyer will maintain. The company, on the other hand, offers a budgetary exchange rate for clients in the mountains. The rate of exchange for a consumer package must be the same if the customer is the same.