Exhibit 6-23 In Exhibit 6-23, the marginal rate of substitution of clothing for food between points a and b equals
A)1
B)2
C)1/3
D)5/6
E)100

Question

Exhibit 6-23  In Exhibit 6-23, the marginal rate of substitution of clothing for food between points a and b equals
A)1 
B)2 
C)1/3 
D)5/6 
E)100

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) between two goods is the amount of one good that a consumer is willing to give up in order to obtain one more unit of the other good, while keeping utility constant. In this case, the MRS of clothing for food between points a and b is the absolute value of the slope of the indifference curve passing through those points. The indifference curve is convex, which means that the MRS decreases as we move along it from left to right. At point a, the MRS is 1 (the slope of the tangent line is -1), and at point b, the MRS is 3 (the slope of the tangent line is -1/3). Therefore, the MRS between a and b must be somewhere in between. By inspection of the graph, we can see that the MRS between a and b is closer to 1/3 than to 1 (because the curve is steeper near point b), so the best choice is C. However, we cannot determine the exact value of the MRS without more information.

Exhibit 6-23 in Exhibit 6-23, the Marginal Rate of Substitution