If your marginal rate of substitution between two goods diminishes continuously as you give up one good for the other, that means the
A) two goods are perfect complements.
B) two goods are perfect substitutes.
C) two goods are neither perfect substitutes nor perfect complements.
D) price per unit of one good declines when you buy it in larger and larger quantities.

Question

Quizplus · Accepted Answer

The diminishing marginal rate of substitution indicates that as you consume more of one good in place of another, you are willing to give up less and less of the second good for additional units of the first. This behavior is characteristic of goods that are neither perfect substitutes (where the substitution rate would be constant) nor perfect complements (where the goods are consumed in fixed proportions).

If Your Marginal Rate of Substitution Between Two Goods Diminishes