What is the marginal rate of substitution, and what role does it play in determining the consumer's optimum choice?
The MRS is the slope of the indifference curve and represents the maximum amount of one commodity the consumer is willing to give up in exchange for one more unit of another commodity. The optimum choice of goods occurs where the budget line is tangent to the highest attainable indifference curve. At that point the MRS equals the slope of the budget line. In other words, the consumer's willingness to trade one good for another just equals the market cost of the trade-off.
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Refer to the above figure. A unit tax has been placed on the good. The consumer pays what amount of the tax?
A) none of the tax B) P2 - P0 C) P2 - P1 D) P1 - P0
Cost-plus pricing and guaranteed profit regulation give the same results
a. True b. False Indicate whether the statement is true or false
In the figure above, Joe is producing at point A. Joe's opportunity cost of producing one shirt is
A) 5/3 of a pair of pants per shirt. B) 3/5 of a pair of pants per shirt. C) 5 pairs of pants per shirt. D) 2 pairs of pants per shirt.
When deficits are run continuously with a constant nominal interest rate, nominal interest payments on the total nominal debt will become smaller relative to future deficits, ceteris paribus.
Answer the following statement true (T) or false (F)