The absolute value of the marginal rate of substitution is a measure of
A)the slope of a budget constraint.
B)the slope of an indifference curve.
C)the relative price of two goods.
D)income effect of a price change.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) represents the rate at which a consumer is willing to trade one good for another while remaining indifferent. The absolute value of the MRS gives the slope of the indifference curve, which represents the consumer's preferences. Therefore, choice B is correct. The slope of the budget constraint (choice A) gives the relative price of two goods, but it is not directly related to the MRS. The income effect of a price change (choice D) refers to the change in purchasing power resulting from a change in price and is not related to the MRS.

The Absolute Value of the Marginal Rate of Substitution Is