The marginal rate of substitution

a. varies along an indifference curve if the curve is bowed inward.

b. is constant along an indifference curve if the curve is a straight line.

c. is greater when a consumer has more of two goods rather than less of two goods.

d. Both a and b are correct. g

Question

Frankie

Business

2 September, 07:00

The marginal rate of substitution

a. varies along an indifference curve if the curve is bowed inward.

b. is constant along an indifference curve if the curve is a straight line.

c. is greater when a consumer has more of two goods rather than less of two goods.

d. Both a and b are correct. g

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Answers (1)

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Evan · Answer 1

The answer is: D) Both a and b are correct.

Explanation:

The marginal rate of substitution (MRS) measures the units of good A that a consumer is willing to give up for another unit of good B. It works with goods that are equally satisfying.

The MRS decreases along the indifference curve if it is convex-shaped (law of diminishing marginal rates of substitution), if the MRS is constant the curve will be a straight line, if the MRS increases the curve will be concave-shaped.

The marginal rate of substitutiona. varies along an indifference curve if the curve is bowed inward.b. is constant along an indifference curve if the curve is a straight line.c. is greater when a consumer has more of two goods rather than less of two goods.d. Both a and b are correct. g

The marginal rate of substitution

a. varies along an indifference curve if the curve is bowed inward.

b. is constant along an indifference curve if the curve is a straight line.

c. is greater when a consumer has more of two goods rather than less of two goods.

d. Both a and b are correct. g