Suppose the marginal rate of substitution of for is given by MRSx, $y = 5 x / 7 y$ , which of the following is correct?
A)The indifference curves will be bowed away from the origin.
B)The indifference curves will be bowed in towards the origin.
C)The indifference curves will be straight lines.
D)It is not possible to tell the shape of the indifference curves with only this information.

Question

Quizplus · Accepted Answer

The given MRS is decreasing, which implies that the consumer is willing to give up lesser and lesser units of y for an additional unit of x as x increases. This suggests diminishing marginal utility of x and increasing marginal utility of y. The shape of the indifference curves are determined by the rate at which the MRS is decreasing. In this case, as the MRS is decreasing at a higher rate, the indifference curves will be bowed away from the origin.

Suppose the Marginal Rate of Substitution of for Is Given y=5x/7yy = 5 x / 7 yy=5x/7y

Suppose the Marginal Rate of Substitution of for Is Given $y = 5 x / 7 y$