Suppose the marginal rate of substitution of x for y is constant for all levels of and Goods and are
A) perfect substitutes.
B) perfect complements.
C) normal goods.
D) inferior goods.

Question

Suppose the marginal rate of substitution of x for y is constant for all levels of  and  Goods  and  are
A) perfect substitutes. 
B) perfect complements. 
C) normal goods. 
D) inferior goods.

Quizplus · Accepted Answer

If the marginal rate of substitution of x for y is constant, it means that the consumer is willing to substitute a constant amount of y for each unit of x. This is only possible if the goods are perfect substitutes, meaning that the consumer is indifferent between one unit of x and a fixed amount of y. In the case of perfect substitutes, the marginal rate of substitution is constant and equal to the ratio of the prices of the two goods.

Suppose the Marginal Rate of Substitution of X for Y