Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situation
A) the marginal rate of substitution falls.
B) the marginal utility of the first rises and the marginal utility of the second good falls.
C) total utility rises.
D) both A and B are correct.

Question

Quizplus · Accepted Answer

Along an indifference curve, as a consumer substitutes one good for another, the marginal utility of the good being given up increases (because the consumer has less of it, so each unit becomes more valuable) and the marginal utility of the good being acquired decreases (because the consumer has more of it, so each additional unit is less valuable). This change in marginal utilities reflects the diminishing marginal rate of substitution, which is the rate at which a consumer is willing to give up one good to obtain an additional unit of another good while keeping utility constant.

Along a Given Indifference Curve, a Consumer Reduces the Quantity