The marginal rate of substitution measures the tradeoff between the
A)prices of two goods along a budget line.
B)different values that two consumers place on a good.
C)amount of one good the consumer is willing to give up in exchange for another good along an indifference curve.
D)different indifference curves.
E)amount of one good the consumer is willing to purchase and its own price.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) measures the amount of one good that a consumer is willing to give up (or tradeoff) in order to get one more unit of another good, while staying on the same indifference curve. Therefore, it measures the tradeoff between the two goods along an indifference curve, not a budget line (A), different values that two consumers place on a good (B), different indifference curves (D), or the amount of one good the consumer is willing to purchase and its own price (E).

The Marginal Rate of Substitution Measures the Tradeoff Between the