The rate at which a consumer is willing to exchange one good for another,and maintain a constant level of satisfaction,is called the
A) relative expenditure ratio.
B) value of marginal product.
C) marginal rate of substitution.
D) relative price ratio.

Question

Quizplus · Accepted Answer

The rate at which a consumer is willing to exchange one good for another and maintain a constant level of satisfaction is called the marginal rate of substitution (MRS). It represents the amount of one good a consumer is willing to give up in order to obtain an additional unit of another good, while remaining equally satisfied. Therefore, choice C, marginal rate of substitution is the correct answer. Choice A, relative expenditure ratio, is an incorrect answer as it does not represent the rate of exchange for goods. Choice B, value of marginal product, is also an incorrect answer as it is a concept related to production, not consumption. Choice D, relative price ratio, is not the best answer, as it does not capture the consumer's willingness to exchange goods at a constant level of utility.

The Rate at Which a Consumer Is Willing to Exchange