An indifference diagram has movies on the vertical axis and sodas on the horizontal axis. As the consumption of sodas increases, the marginal rate of substitution ________ and the indifference curve becomes ________.
A) falls; flatter
B) falls; steeper
C) rises; flatter
D) rises; steeper

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to exchange one good for another while remaining on the same indifference curve. As the consumption of sodas increases, the marginal utility of sodas falls and the marginal utility of movies remains constant. Thus, the consumer is willing to give up fewer movies for each additional soda, indicating a lower MRS. This causes the indifference curve to become flatter. Therefore, the correct choice is A, which states that the marginal rate of substitution falls and the indifference curve becomes flatter.

An Indifference Diagram Has Movies on the Vertical Axis and Sodas