The marginal rate of substitution:
A) remains constant as the consumer moves around an indifference curve.
B) is constant if the goods are perfect complements.
C) decreases as the consumer moves down a typical indifference curve.
D) cannot be defined if the goods are perfect substitutes.
E) none of the above

Question

Quizplus · Accepted Answer

The marginal rate of substitution decreases as the consumer moves down a typical indifference curve. This is because the consumer must give up more and more of one good to obtain the same amount of satisfaction as they already have from the other good. Choices A and B are incorrect because the marginal rate of substitution can change depending on the preferences of the consumer and the characteristics of the goods. Choice D is incorrect because the marginal rate of substitution can still be defined, even if the goods are perfect substitutes.

The Marginal Rate of Substitution