Answer to Question #170321 in Microeconomics for Wellington

Question

1) According to the ordinal utility approach, the consumer attains equilibrium where

Isoquant meets the isocost

marginal rate of substitution of X for Y equals the marginal utility of X over Y

the marginal utility of x equals the price of x

where the budget line equals the isoquant

Answer 1

Ordinal utility theory claims that it is only meaningful to ask which option is better than the other, but it is meaningless to ask how much better it is or how good it is.

So, according to the ordinal utility approach, the consumer attains equilibrium where the budget line equals the isoquant.