The marginal rate of substitution ____ as one moves downward along the indifference curve.
A) increase
B) remains constant
C) decreases
D) increases and then decreases

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) measures the rate at which a person is willing to give up one good in exchange for another while remaining on the same indifference curve. As one moves downward along the indifference curve, the quantity of the first good decreases while the quantity of the second good increases. Since the person has more of the second good, the marginal utility (MU) of the second good decreases, while the MU of the first good increases. This means that the person would be willing to give up less of the second good for each unit of the first good, resulting in a decreasing MRS. Therefore, the best choice is C, decreases.

The Marginal Rate of Substitution ____ as One Moves Downward