The amount of a good that an individual has:
A)is only affected by prices
B)affects the rate at which she is willing to trade
C)is only affected by income
D)will not affect the marginal rate of substitution

Question

Quizplus · Accepted Answer

The amount of a good that an individual has affects the rate at which she is willing to trade. This is because as the individual acquires more of a good, the marginal utility (satisfaction) that they derive from each additional unit of the good decreases. Therefore, they may be willing to trade a larger amount of the good for a smaller amount of another good that provides them with greater marginal utility.

The Amount of a Good That an Individual Has