The table shows an indifference schedule for several combinations of X and Y. In moving from combination a to b, then to c, d, and e, the marginal rate of substitution of X for Y
A) increases.
B) decreases.
C) stays the same.
D) decreases and then increases.

Question

The table shows an indifference schedule for several combinations of X and Y.  In moving from combination a to b, then to c, d, and e, the marginal rate of substitution of X for Y
A) increases. 
B) decreases. 
C) stays the same. 
D) decreases and then increases.

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is defined as the amount of Y that must be sacrificed to obtain an additional unit of X while holding utility constant. In this case, as we move from combination a to b, c, d, and e, we can see that the amount of Y that must be given up to obtain each additional unit of X increases. This means that the MRS of X for Y decreases, indicating that the consumer is becoming less willing to give up Y for X. Therefore, the best choice is B, which states that the marginal rate of substitution of X for Y decreases.

The Table Shows an Indifference Schedule for Several Combinations of X