If the CPI in 2004 is 200, and in 2005 the CPI is 180, the rate of inflation from 2004 to 2005 is

Explain the conditions that are met when a consumer has found the best affordable combination of goods to buy. (Use the terms budget line, marginal rate of substitution, and relative price in your explanation.)

What will be an ideal response?

One way to explain the convexity of isoquants is to say that

A) as labor increases and capital decreases, MPL rises while MPK falls. B) as labor increases and capital decreases, MPL falls while MPK rises. C) as labor increases and capital decreases, MPL and MPK both fall. D) as labor increases and capital decreases, MPL and MPK both rise.