Principles of Microeconomics / Unit 5 MIC 0422 short lesson, about 20 seconds
The Tangency Rule
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The idea
The best affordable bundle is where the budget line touches the highest reachable indifference curve. At that tangency the marginal rate of substitution equals the price ratio.
In practice
A curve crossing the budget line twice leaves a higher curve reachable between.
Where people slip
Tangency and the equal-ratios rule are one condition in two languages: the last dollar buys the same satisfaction either way.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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