The assumption that the magnitude of the slope of an indifference curve decreases moving to the right along the indifference curve is known as the assumption of
A) the price effect.
B) an increasing marginal rate of substitution.
C) a diminishing marginal rate of substitution.
D) an indifference curve effect.

Question

Quizplus · Accepted Answer

The assumption of a diminishing marginal rate of substitution reflects the idea that as a consumer substitutes one good for another, the amount of the good being given up becomes less valuable to them, hence the slope of the indifference curve (representing the rate at which they are willing to substitute one good for another) decreases as we move to the right along the curve. This captures the principle that consumers are willing to give up smaller and smaller amounts of one good to obtain additional units of another, reflecting diminishing additional satisfaction.

The Assumption That the Magnitude of the Slope of an Indifference