The marginal rate of substitution measures the tradeoff between the
A)different values that two consumers place on a good.
B)prices of two goods along a budget line.
C)amount of one good the consumer is willing to purchase and its own price.
D)different indifference curves.
E)amount of one good the consumer is willing to give up in exchange for another good along an indifference curve.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) measures the amount of one good a consumer is willing to give up in order to obtain one more unit of another good, while remaining at the same level of utility. Therefore, the MRS reflects the tradeoff between two goods along an indifference curve, making option E the best choice.

The Marginal Rate of Substitution Measures the Tradeoff Between the