The marginal rate of substitution of X for Y is defined as: A) P_X/P_Y. B) P_XP_Y. C) MU_X MU_Y. D) MU_X/MU_Y. E) MU_X/P_X.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) of X for Y is defined as the amount of Y an individual is willing to give up for one additional unit of X while remaining equally satisfied (or keeping utility constant). Mathematically, MRS= MUSx / MUSy, where MUSx represents the marginal utility of X and MUSy represents the marginal utility of Y. Therefore, the correct choice is D, where MU_{represents the marginal utility of X or Y and} represents the units of the other commodity (either Y or X).

The Marginal Rate of Substitution of X for Y Is