Which of the following correctly expresses the relationship between the marginal utilities of two goods and marginal rate of substitution between the goods? A) MRS_XY = (MU_Y/MU_X) B) MRS_XY = (MU_X/MU_Y) C) MRS_XY = (U/∆X) D) MRS_XY = (U/∆Y)

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) between two goods X and Y is the rate at which a consumer is willing to trade one good for the other while maintaining the same utility level. Mathematically, this can be expressed as MRS = MUx/MUy, where MUx and MUy are the marginal utilities of X and Y, respectively. Therefore, if we rearrange this equation to solve for MU_X (the marginal utility of good X at a specific bundle), we get MU_X = MRS * MU_Y. Similarly, we can rearrange the equation to solve for MU_Y, which is MU_Y = MRS * MU_X. Therefore, the correct expression for the relationship between marginal utilities and the marginal rate of substitution is MRS_XY = (MU_X/MU_Y).

Which of the Following Correctly Expresses the Relationship Between the Marginal