Asked by Joycelyn Acheampong on Apr 26, 2024
Verified
The marginal rate of substitution measures the
A) magnitude of the substitution effect.
B) total utility received by a consumer when equilibrium is achieved.
C) extra utility that a consumer derives from successive units of a product.
D) consumer's willingness to substitute one product for another so that total utility will remain constant.
Marginal Rate
Refers to the rate at which one quantity changes with respect to a change in another quantity, commonly used in the context of taxes and interest rates.
Substitution Effect
The change in consumption of goods in response to a change in their relative prices, holding the consumer's level of utility constant.
Total Utility
The total satisfaction or benefit that a person derives from consuming a certain quantity of goods or services.
- Explain the link between the marginal rate of substitution and the trajectory followed along an indifference curve.
Verified Answer
Learning Objectives
- Explain the link between the marginal rate of substitution and the trajectory followed along an indifference curve.
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