An assumption underlying indifference curve analysis is that MUx/MUy ________ as less of X and more of Y is consumed.
A) increases
B) decreases
C) remains constant
D) always equals one

Question

Quizplus · Accepted Answer

As less of X and more of Y is consumed, the marginal rate of substitution (MUx/MUy) increases because the consumer is willing to give up more of Y to obtain an additional unit of X, reflecting diminishing marginal utility.

An Assumption Underlying Indifference Curve Analysis Is That MUx/MUy ________