Assume the quantity of apples is measured on the horizontal axis and the quantity of oranges is measured on the vertical axis. If Andy likes both apples and oranges, then his Marginal Rate of Substitution (i.e. the slope of an indifference curve) along the indifference curve indicates:
A) how many oranges he is willing to give up in order to obtain one more apple.
B) how many additional oranges he wants in order to give up two apples.
C) how many oranges he is willing to give up in order to get rid of one apple.
D) how many apples he is willing to give up in order to get rid of one orange.

Question

Quizplus · Accepted Answer

The Marginal Rate of Substitution along an indifference curve indicates the rate at which a consumer is willing to trade off one good for another while remaining indifferent (having the same level of utility). Therefore, the slope of the indifference curve represents how many units of the vertical good (oranges) the consumer is willing to give up in order to obtain one more unit of the horizontal good (apples). Option A correctly represents this concept. Option B refers to a different concept (the slope of the budget line), while options C and D are the inverse of the correct answer.

Assume the Quantity of Apples Is Measured on the Horizontal