Along an indifference curve,if the marginal rate of substitution is 3,then the consumer is willing to
A) give up 1 unit of the good measured along the y-axis for 3 units of the good measured along the x-axis.
B) give up 3 units of the good measured along the y-axis for 1 unit of the good measured along the x-axis.
C) pay $3 for one unit of the good measured along the y-axis.
D) pay $3 for one unit of the good measured along the x-axis.
E) give up 3 units of the good measured along the y-axis for 1 unit of income, that is, $1 of income.

Question

Quizplus · Accepted Answer

Marginal rate of substitution (MRS) represents the maximum amount of one good a consumer is willing to give up for one additional unit of the other good while remaining on the same indifference curve. Therefore, if the MRS is 3, the consumer is willing to give up 3 units of the good measured along the y-axis for 1 unit of the good measured along the x-axis. In other words, the consumer is willing to trade 3 units of one good for 1 unit of the other good. Therefore, the correct answer is B.

Along an Indifference Curve,if the Marginal Rate of Substitution Is