Jodie has indifference curves for CDs and colas, with CDs on the vertical axis. The flatter her indifference curves are, the
A) smaller her average rate of substitution.
B) larger her average rate of substitution.
C) smaller her marginal rate of substitution.
D) larger her marginal rate of substitution.

Question

Quizplus · Accepted Answer

Indifference curves represent the combinations of CDs and colas that give Jodie the same level of satisfaction. The slope of the indifference curve indicates the marginal rate of substitution (MRS), which is the amount of cola Jodie is willing to give up for one more CD. The flatter the indifference curve, the smaller the MRS and the less willing Jodie is to trade one good for another. Therefore, the correct choice is (C) smaller her marginal rate of substitution.

Jodie Has Indifference Curves for CDs and Colas, with CDs