The contact curve in economics refers to the locus of points where the marginal rate of substitution (MRS) between two goods is equal to the rate at which they can be exchanged in the market. It represents the combinations of goods where the consumer is indifferent, given their preferences and budget constraint.
The contact curve is important in analyzing consumer choices and trade-offs, as it helps to determine the optimal consumption bundle that maximizes the consumer's utility. The slope of the contact curve is determined by the relative prices of the goods in the market.
In production theory, the contact curve represents the combinations of inputs that minimize the cost of producing a given level of output. It shows the different ways in which inputs can be combined to produce output efficiently, given the prices of the inputs.
Overall, the contact curve provides a graphical representation of consumer preferences and production possibilities, helping to analyze and understand economic decision-making.
Contact curve in economics
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