When two goods are perfect substitutes,what do we know about the marginal rate of substitution
A)It is constant.
B)It decreases as the scarcity of one good increases.
C)It increases as the scarcity of one good increases.
D)It increases as the abundance of one good increases.

Question

Quizplus · Accepted Answer

When two goods are perfect substitutes, they provide the same level of utility to the consumer, regardless of the amount consumed. Therefore, the marginal rate of substitution (MRS) between the two goods is constant. MRS is the amount of one good that a consumer is willing to give up to obtain one additional unit of the other good. In the case of perfect substitutes, the MRS is always equal to the ratio of the prices of the two goods.

When Two Goods Are Perfect Substitutes,what Do We Know About