Suppose the marginal rate of substitution of x for y is constant for all levels of x and y . Goods x and y are
A) perfect substitutes.
B) perfect complements.
C) normal goods.
D) inferior goods.

Question

Quizplus · Accepted Answer

If the marginal rate of substitution is constant, it means that the consumer is willing to substitute x for y at a constant rate, regardless of the amounts consumed. This is a characteristic of perfect substitutes, where the consumer is willing to trade one unit of x for one unit of y, regardless of the quantities consumed.

Suppose the Marginal Rate of Substitution of X for Y