If you are willing to give up 8 units of good A (on the vertical axis) for 4 units of good B (on the horizontal axis) and your level of satisfaction is unchanged, the marginal rate of substitution of B for A is:
A)0.5.
B)2.
C)1.
D)5.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) of good B for good A is the amount of good A that must be given up for one extra unit of good B while maintaining the same level of satisfaction. In this case, the MRS is 8/4, which simplifies to 2. Therefore, the best choice is to continue giving up 8 units of good A for 4 units of good B, as long as the MRS remains constant.

If You Are Willing to Give Up 8 Units of Good