The Marginal Rate of Substitution Indicates

question 62

Multiple Choice

The marginal rate of substitution indicates

• A)how much of one good a consumer is willing to give up to get one more unit of another good while remaining equally satisfied
• B)how much of a good a consumer can receive for $1 while remaining equally satisfied
• C)the tendency of a consumer to substitute lower-priced goods for a good whose price has increased
• D)the limits of utility analysis
• E)the basis of consumer surplus

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Definitions:

Circular Flow

A model in economics that depicts how goods and services and money move through the economy between households, businesses, government, and foreign sectors.

Value Added

The increase in worth of a product or service as a result of a particular process, calculated by the difference between the sale price and the production cost.

Double Counting

The error of including the same transaction or item more than once in a calculation or analysis, leading to inaccurate results.

Injections

Additional spending entering the economy, typically through government spending, investment, and exports, which stimulates economic activity.