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Exercises · Q9
Q.

A consumer is indifferent between the following combinations of goods X and Y. Compute the Marginal Rate of Substitution between each successive pair, and state whether the Law of Diminishing MRS holds.

CombinationUnits of XUnits of Y
A215
B311
C48
D56
E65
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Computing MRSxy=−ΔYΔXMRS_{xy}=-\dfrac{\Delta Y}{\Delta X} for each successive move (each move has ΔX=+1\Delta X=+1):

MoveΔXΔYMRSxy
A → B+1−44
B → C+1−33
C → D+1−22
D → E+1−11

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