The marginal rate of substitution (MRS)of X for Y in consumption refers to the:
A) amount of X that a nation must give up for one extra unit of Y and still remain on the same indifference curve
B) amount of Y that a nation must give up for one extra unit of X and still remain on the same indifference curve
C) amount of X that a nation must give up for one extra unit of Y to reach a higher indifference curve
D) amount of Y that a nation must give up for one extra unit of X to reach a higher indifference curve

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) refers to the amount of one good that a consumer is willing to give up in order to obtain an additional unit of another good while maintaining the same level of satisfaction (i.e. remaining on the same indifference curve). Therefore, the correct answer is B, as it represents the amount of Y that must be given up for one extra unit of X while remaining on the same indifference curve.

The Marginal Rate of Substitution (MRS)of X for Y in Consumption