The marginal rate of substitution between two goods always equals the
A)marginal utility of one divided by the marginal utility of the other.
B)marginal utility of one times the marginal utility of the other.
C)price of one good divided by the price of the other.
D)Both a and c are correct.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) between two goods measures the amount of one good a consumer is willing to give up, in exchange for an additional unit of the other good while maintaining the same level of satisfaction. The MRS is equal to the ratio of the marginal utility of one good to the marginal utility of the other good. Therefore, option A is correct as it states the correct formula for calculating MRS. Option B is incorrect as it suggests multiplying the marginal utilities, which is not the correct formula for MRS. Option C is incorrect as it suggests the ratio of the prices, which is not the formula for MRS unless the goods have equal prices. Option D is incorrect as option C is not a valid formula for MRS, and only option A is correct.

The Marginal Rate of Substitution Between Two Goods Always Equals