Asked by Beatriz Sarai on May 14, 2024
Verified
Assume that a consumer's indifference curve is bowed inward and negatively sloped. As the consumer moves from left to right along the horizontal axis, the consumer's marginal rate of substitution
A) increases.
B) decreases.
C) remains constant.
D) increases, then decreases.
Marginal Rate
The rate at which one quantity changes relative to a change in another quantity.
Substitution
The economic principle where consumers replace pricier items with less expensive alternatives when prices rise or their purchasing power decreases.
Indifference Curve
This is a graph representing different bundles of goods between which a consumer is indifferent, meaning that each combination offers the same level of utility to the consumer.
- Leverage the marginal rate of substitution (MRS) to assess behavior patterns of consumers and advance their decision optimization.
Verified Answer
LR
Lizette RonquilloMay 20, 2024
Final Answer :
B
Explanation :
When an indifference curve is bowed inward and negatively sloped, the marginal rate of substitution (MRS) decreases as the consumer moves from left to right along the horizontal axis. This is because the consumer is willing to give up fewer units of one good to gain an additional unit of another good as they obtain more of that good, reflecting diminishing marginal utility.
Learning Objectives
- Leverage the marginal rate of substitution (MRS) to assess behavior patterns of consumers and advance their decision optimization.