Figure 21-11
-Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from A to B?
A)12
B)6
C)4

Question

Figure 21-11 
-Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from A to B?
A)12 
B)6 
C)4

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is defined as the rate at which a consumer is willing to trade one good for another while maintaining the same level of utility. In this case, the consumer is willing to give up 4 units of good X for 1 unit of good Y as she moves from point A to point B. Therefore, the best choice would be to choose a point on the budget line that has an MRS of 4, such as point C or point D. Choosing a point with a higher MRS, such as point E, would imply a higher willingness to trade X for Y, which would not correspond with the budget constraint. Choosing a point with a lower MRS, such as point A or point F, would imply a lower willingness to trade X for Y, which would not optimize the consumer's preferences given the budget constraint.

Figure 21-11 -Refer to Figure 21-11. What Is the Consumer's Marginal Rate