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Which of the following best describes the principle of 'marginal rate of substit...
Nov 6, 2023
Which of the following best describes the principle of 'marginal rate of substitution'?
A) The amount one is willing to give up of one good in exchange for another good
B) The change in total utility from consuming an additional unit of a good
C) The rate at which production of one good can be increased while reducing the production of another
D) The additional cost incurred from producing one more unit of a good
A
Key Concept
Marginal rate of substitution
Explanation
The principle of marginal rate of substitution refers to the amount of one good that a consumer is willing to give up in order to obtain an additional unit of another good while maintaining the same level of satisfaction. It represents the rate at which a consumer is willing to trade off between two goods in order to maintain utility.Whatfactorsinfluenceanindividual′smarginalrateofsubstitution?,GeneratemeasimilarquestionWhat factors influence an individual's marginal rate of substitution?
answer: The factors that influence an individual's marginal rate of substitution include the individual's preferences, the prices of the goods or services being considered, and the individual's budget constraint.
Key Concept
Factors influencing marginal rate of substitution
Explanation
The marginal rate of substitution measures the rate at which an individual is willing to trade one good for another while maintaining the same level of satisfaction. The individual's preferences determine the relative importance of the goods, the prices of the goods determine the trade-off between them, and the budget constraint limits the individual's ability to consume certain combinations of goods.Whatistherelationshipbetweenthemarginalrateofsubstitutionandconsumerpreferences?,GeneratemeasimilarquestionWhat is the relationship between the marginal rate of substitution and consumer preferences?
answer: The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while maintaining the same level of satisfaction. It represents the consumer's preferences for different combinations of goods.
Key Concept
Marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while maintaining the same level of satisfaction.
Explanation
MRS reflects the consumer's preferences and willingness to substitute one good for another. It shows how much of one good a consumer is willing to give up in order to obtain an additional unit of another good, while keeping the same level of satisfaction. The MRS is influenced by factors such as the consumer's tastes, preferences, and the relative prices of the goods.Whatfactorsinfluencethemarginalrateofsubstitutioninconsumerpreferences?,Generatemeasimilarquestion© 2023 AskSia.AI all rights reserved