The marginal rate of substitution is ________, the ________ is the ________.
A) greater; flatter; indifference curve
B) greater; steeper; budget line
C) smaller; steeper; indifference curve
D) smaller; flatter; indifference curve

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) measures the amount of one good a consumer is willing to give up in order to obtain an extra unit of another good, while remaining indifferent (on the same indifference curve). The MRS decreases (i.e. becomes smaller) as we move downward along an indifference curve (because we must give up more and more of the other good to get one more unit of the good we are willing to substitute it for). The shape of the indifference curve itself has no effect on the MRS. Therefore, the correct answer is D, where the MRS is smaller when the indifference curve is flatter.

The Marginal Rate of Substitution Is ________, the ________ Is

The Marginal Rate of Substitution Is , the Is