M01 broo6651 1e sg c01


curve? A linear indifference curve



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Ch03
sol 03, sol 03, Ch07
curve? A linear indifference curve
The MRS measures how much of a good you are willing to give up in exchange for one more unit of the other good, keeping utility constant. The MRS diminishes along a convex indifference curve. This occurs because as you move down along the indifference curve, you are willing to give up less and less of the good on the vertical axis in exchange for one more unit of the good on the horizontal axis. The MRS is also the negative of the slope of the indifference curve, which decreases (becomes closer to zero) as you move down along the indifference curve. The MRS is constant along a linear indifference curve because the slope does not change. The consumer is always willing to trade the same number of units of one good in exchange for the other.
6. Explain why an MRS between two goods must equal the ratio of the price of the goods for the

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