The rate at which a consumer will exchange one good for another is called
A) Marginal utility
B) The marginal rate of transformation
C) The rate of substitutability
D) The marginal rate of substitution

Question

Quizplus · Accepted Answer

The rate at which a consumer will exchange one good for another is called the marginal rate of substitution (MRS), which is measured by the slope of the consumer's indifference curve. MRS measures the willingness of a consumer to trade off one good for another while maintaining the same level of utility. Marginal utility (A) refers to the additional utility gained from consuming an additional unit of a good, while the marginal rate of transformation (B) refers to the ratio at which one good can be exchanged for another in a production scenario. The rate of substitutability (C) is not a commonly used term in economics and does not accurately describe the concept being asked for in this question.

The Rate at Which a Consumer Will Exchange One Good