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Author Question: Explain the difference between the marginal rate of substitution and the marginal rate of ... (Read 68 times)

bio_gurl

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on: Jul 1, 2018
Explain the difference between the marginal rate of substitution and the marginal rate of transformation.
 
  What will be an ideal response?

Question 2

The slope of the budget line represents the rate at which the consumer is willing to trade one good for another at any given bundle.
 
  Indicate whether the statement is true or false
Microeconomics ¦ Perloff ¦ 8th Edition
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kilada

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Reply #1 on: Jul 1, 2018
Answer to Question 1

The marginal rate of substitution is a consumer's willingness to trade one good for another based on utility. The marginal rate of transformation is the consumer's ability to trade one good for another based on prices.

Answer to Question 2

False. This describes the slope of the indifference curve. The slope of the budget line represents the rate at which the consumer must trade one good for another at any given bundle.


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