Max consumes only yoghurt and almonds,and he is on his highest possible indifference curve.Bundle A (four yoghurts and two almonds)and bundle B (three yoghurts and three almonds)are on this indifference curve.Between points A and B,what is Max's marginal rate of substitution of yoghurt for almonds?
A) 1
B) 2
C) 3
D) 1.33

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which Max is willing to give up almonds for yoghurt while remaining on the same indifference curve. Between bundles A and B, Max gives up 1 yoghurt to gain 1 almond, so the MRS is 1.

Max Consumes Only Yoghurt and Almonds,and He Is on His