If the price of a good Y falls,then the marginal rate of substitution between X and Y:
A) increases.
B) decreases.
C) remains the same.
D) depends on whether X and Y are normal or inferior goods, and we cannot tell without that information.

Question

Quizplus · Accepted Answer

When the price of good Y falls, it becomes relatively cheaper compared to X. As a result, consumers would buy more Y and less of X to optimize their utility. Therefore, the marginal rate of substitution between X and Y increases, indicating that the consumer will be willing to give up more units of X to get an additional unit of Y.

If the Price of a Good Y Falls,then the Marginal