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Theory of consumer behaviour — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsTheory of consumer behaviour3 Marks
Question
Define Marginal Rate of Substitution. Explain its behaviour along an indifference curve.
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Answer

Marginal Rate of Substitution (MRS) is defined as the rate at which a consumer is willing to sacrifice units of a good to obtain one more unit of the other good.' As the given consumer moves downwards along the same indifference curve, MRS diminishes. It shows that the consumer is willing to sacrifice lesser units of good Y in order to gain an additional unit of good X. This happens due to the operation of Law of Diminishing Marginal Utility.

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