Q9 of 36 Page 1

Explain with the help of a numerical example, the meaning of diminishing marginal rate of substitution.

Marginal rate of substitution is the rate at which the consumer is willing to sacrifice one commodity to obtain one more unit of other commodity.


For Example



This shows that the consumer is willing to sacrifice less unit of Y to obtain additional unit of X.


More from this chapter

All 36 →
8

Distinguish between ‘increase in demand’ and ‘increase in quantity demanded’ of a good.

 8

Explain the meaning of ‘Budget set’ and ‘Budget line’.

 10

Define market supply. Explain the factor ‘input prices’ that can cause a change in supply.

 10

Give the behaviour of marginal product and total product as more and more units of only one input are employed while keeping other inputs as constant.