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OCW Scholar - Principles of Microeconomics
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Explain why a marginal rate of substitution between two goods must equal the ratio of prices of the goods for the consumer to achieve maximum satisfaction. A consumer achieves maximum satisfaction when the marginal rate of substitution is equal to the ratio of prices because
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use the indifference curve and budget constrain line to see that. if the slope of indifference curve i.e. -MRS_x/MRS_y does not equal to slope of budget constrain line i.e. -price_x/price_y. you could move along the budget constrain to reach a higher indifference curve. that simply means you does not maximize your utility given the budget constrain.
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