In an indifference curve diagram, the quantities of good Y are measured along the vertical axis and the quantities of good X are measured along the horizontal axis. The marginal rate of substitution is defined as
A) how much good Y you must give up to get one more unit of good X.
B) how much good Y you are willing to give up to get one more unit of good X.
C) how much you prefer to substitute good X for good Y.
D) the relative price of good Y in terms of good X.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the amount of one good a consumer is willing to give up for another good, holding utility constant. It reflects the consumer's willingness to trade between two goods, which is best captured by choice B.

In an Indifference Curve Diagram, the Quantities of Good Y