If you are willing to give up 5 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:
A) 0.5.
B) 1.
C) 2.
D) 5.

Question

Quizplus · Accepted Answer

The marginal rate of substitution is the amount of one good a consumer is willing to give up for one more unit of the other good while maintaining the same level of satisfaction. In this case, the consumer is willing to give up 5 units of good Y for 5 units of good X, which means the marginal rate of substitution is 1 (5/5). Therefore, the best choice(s) would depend on the prices of X and Y, as the consumer would choose the combination of goods that gives them the highest level of satisfaction for a given budget.

If You Are Willing to Give Up 5 Units of Good