Manny consumes only bananas and DVDs,and he is on his highest possible indifference curve.Two bundles on this indifference curve are bundle A (five bananas and two DVDs)and bundle B (three bananas and three DVDs).Between points A and B,what is Manny's marginal rate of substitution of bananas for DVDs?
A) 1
B) 2
C) 0.5
D) 1.33

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. Between bundles A and B, Manny gives up 2 bananas to gain 1 DVD, so the MRS is 2 bananas per 1 DVD, which is 0.5 DVDs per banana.

Manny Consumes Only Bananas and DVDs,and He Is on His