The marginal rate of substitution measures the distance between one indifference curve and the next one.

Is the following statement true or false? Briefly explain your answer. " The marginal rate of substitution measures the distance between one indifference curve and the next one."

Solutions

Expert Solution

False

MRS is the slope of indifference curve i.e it is the rate at which one good will be substituted to gain additional unit of other good.

In other words ,it measures the distance at which different points are located on an IC.

The distance between A & B lying on same IC is measured by MRS.

MRS = units of good Y sacrificed/unit of good X gained

Rahul Sunny answered 1 year ago

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