What happens to the absolute value of marginal rate of substitution as you move down a convex (bowed toward the origin)indifference curve?
A)Increases
B)Decreases
C)Remains constant
D)Could increase or decrease

Question

Quizplus · Accepted Answer

The absolute value of the Marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while remaining indifferent. It is calculated as the absolute value of the ratio of the marginal utility of the two goods.

On a convex (bowed toward the origin) indifference curve, the MRS decreases as one moves down the curve. This is because as the consumer consumes more of one good, the marginal utility of that good decreases, and the consumer is willing to trade less of it for the other good. Therefore, the absolute value of the MRS decreases.

What Happens to the Absolute Value of Marginal Rate of Substitution