A constant marginal rate of substitution between two goods implies? A) the goods are perfect...
Question:
A constant marginal rate of substitution between two goods implies?
A) the goods are perfect complements.
B) one good is normal and one good is inferior.
C) the goods are imperfect substitutes.
D) the goods are perfect substitutes.
E) the goods are both inferior.
Marginal Rate of Substitution:
The marginal rate of substitution (MRS) is the rate at which a consumer can substitute one good for the other. It is calculated by determining the ratio of the marginal utilities of the two goods in question.
Answer and Explanation: 1
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- The correct answer is: D) the goods are perfect substitutes.
If two goods are perfect substitutes, their indifference curve is a straight line which...
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Marginal Rate of Substitution | MRS Definition, Formula & Example
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Chapter 3 / Lesson 51
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Learn how to calculate the marginal rate of substitution and its application in economics. View examples of the formula in use with real world application.
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