Question

Assume that a consumer's indifference curve is bowed inward and satisties the other thrce properties of indiference curves. 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.

Answer 1

b. decreases.

Step-by-step explanation:

The marginal rate of substitution (MRS) can be described as the rate at which a consumer is willing to give up or sacrifice some units of one commodity in exchange for another commodity in order to maintain the same level of utility.

As the consumer moves from left to right along the horizontal axis of standard indifferent curve, the consumer's MRS decreases and this known as the law of diminishing MRS.

The law of diminishing MRS states that the consumer is ready to give less and less unit of one commodity to obtain more units of another commodity as he moves moves from left to right along the horizontal axis of standard indifferent curve.