Suppose we measure the quantity of good X on the horizontal axis and the quantity of good Y on the vertical axis If indifference curves are bowed inward, as we move from having an abundance of good X to having an abundance of good Y, the marginal rate of substitution of good Y for good X (the slope of the indifference curve) ?
Correct answer: A. rises
- A. rises
- B. stays the same
- C. could rise or fall depending on the relative prices of the two goods.
- D. falls
Explanation
A bowed-inward, or convex, indifference curve reflects diminishing marginal willingness to substitute one good for the other. Moving from abundant X toward abundant Y makes the curve steeper in absolute value, so the marginal rate of substitution rises.
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