The larger the marginal rate of substitution, the larger is the amount of one good that the consumer is willing to give up in exchange for another good and still remain at the same level of satisfaction.

Question

Quizplus · Accepted Answer

A larger marginal rate of substitution indicates that the consumer is willing to give up a larger amount of one good in exchange for another good, while still being equally satisfied. This is because the consumer derives a greater level of satisfaction or utility from the second good compared to the first good. Thus, option A is correct.

The Larger the Marginal Rate of Substitution, the Larger Is