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in Economics by (25 points)
edited by

What happens to the MRS when the consumer moves downward along the indifference curve? Give reasons for your answer

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1 Answer

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by (51.5k points)

MRS means Marginal rate of substitution it refers to that rate at which consumer is willing to substitute a good for other one.

It tends to decline when we move along the Indifference Curve...

Because to law of diminishing marginal Utility...

Example:
At point A and B consumer is willing to give up 1.5 units of good Y for one more of good X...

But as move.

The consumer will give up 0.75 unit of Y for X.... so it declined

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