In an indifference curve diagram, the quantities of good Y are measured along the vertical axis and the quantities of good X are measured along the horizontal axis. The marginal rate of substitution is defined as
A) how much good Y you must give up to get one more unit of good X.
B) how much good Y you are willing to give up to get one more unit of good X.
C) the relative price of good Y in terms of good X.
D) how much you prefer to substitute good X for good Y.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) measures how much of good Y (the vertical axis) the consumer is willing to give up in exchange for one more unit of good X (the horizontal axis). Therefore, option B is the correct choice as it describes the definition of MRS accurately. Option A describes the concept of opportunity cost rather than MRS, option C describes relative price, and option D is a vague statement that does not accurately describe the concept of MRS.

In an Indifference Curve Diagram, the Quantities of Good Y