The marginal rate of substitution
A) can be computed by measuring the slope of the indifference curve.
B) can be computed by measuring the curvature of the indifference curve.
C) cannot be deduced from the properties of the indifference curve.
D) can only be computed if we know the prices of all goods.
E) can be deduced from the budget line.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer is willing to exchange one good for another while still maintaining the same level of utility. It can be computed by measuring the slope of the indifference curve, which shows all possible combinations of two goods that yield the same level of satisfaction to the consumer. The steeper the slope, the higher the MRS, indicating that the consumer is willing to give up more of one good for a unit increase in the other good.

The Marginal Rate of Substitution