Higher rates of substitution are indicated by _______ values of the marginal rate of substitution.
A) small negative
B) large negative
C) small positive
D) large positive

Question

Quizplus · Accepted Answer

When the marginal rate of substitution (MRS) is large and positive, it indicates that a consumer is willing to give up a significant amount of one good in exchange for a small increase in the other good. This indicates a high rate of substitution. Conversely, small values of the MRS indicate a low rate of substitution, meaning the consumer is less willing to give up one good for the other. Therefore, the best choice is D - a large positive value of MRS, indicating a higher rate of substitution.

Higher Rates of Substitution Are Indicated by _______ Values of the Marginal