Final answer:
Diminishing MRS signifies that a consumer is willing to give up fewer units of good Y for an additional unit of good X, reflecting the principle of diminishing marginal utility.
Step-by-step explanation:
The concept of diminishing marginal utility explains that as a consumer consumes more units of a good, the additional satisfaction or utility they gain from consuming each additional unit decreases over time. When faced with the options given in the question, diminishing marginal rate of substitution (MRS) means that a consumer is willing to give up fewer units of good Y to obtain one more unit of good X, as they consume more of X. This is because the utility they derive from each additional unit of X decreases, making them less willing to trade away a larger amount of Y for X.
In the context of the given options, the correct answer is (a) Consumer wants to give up lesser units of Y in exchange for good X, as this reflects the basic principle of diminishing MRS, which is directly related to diminishing marginal utility.