The rate at which a person is willing to give up a litre of petrol to get one more kilogram of coffee and remain on the same indifference curve is called his or her
A) relative cost of coffee in terms of petrol.
B) marginal rate of substitution.
C) indifference cost of coffee.
D) personal price of coffee.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. In this context, it refers to the rate at which a person is willing to give up petrol for coffee to remain indifferent or on the same indifference curve.

The Rate at Which a Person Is Willing to Give