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2 cards from this section. Quick, good the night before a test.
Define the Marginal Rate of Substitution.
Think about how much of one good a consumer is willing to give up for more of another.
What is an indifference curve?
Recall what it means to be indifferent between two choices.
What does the term Marginal Rate of Substitution signify?
It's about substitution without losing satisfaction.
True or False: Indifference curves can intersect.
Consider the implications of intersecting utility levels.
A consumer's utility from pairs of goods shows an indifference curve. If the consumer originally enjoys a mix of 4 bananas and 2 mangoes and is indifferent between this mix and 3 bananas and 3 mangoes, how does the MRS change?
Trace the changes in the trade-off as quantity shifts.
Given a budget constraint changing due to price alterations, calculate the new combination of goods looked after by the consumer if their utility is to be upheld.
Analyze effects on MRS when considering the budget's new slope.
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