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.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while remaining on the same indifference curve. It is the slope of the indifference curve at any point. If the indifference curve is bowed inward (convex to the origin), the MRS will vary along the curve, meaning the slope is steeper at one end and flatter at the other. If the indifference curve is a straight line, the MRS is constant along the curve. Therefore, both options A and B are correct. Additionally, the MRS is higher at the point where the consumer has more of both goods, as the marginal utility of each good decreases as the consumer has more of each one. This means the consumer is willing to give up more of one good to obtain a small amount of the other good, resulting in a higher MRS. Therefore, option C is incorrect.

The Marginal Rate of Substitution