The Marginal Rate of Substitution Between First-Period Consumption and Second-Period

question 107

Multiple Choice

The marginal rate of substitution between first-period consumption and second-period consumption:

• A) is the inverse of the slope of an indifference curve, in which first-period consumption is graphed along the horizontal axis.
• B) is generally high when first-period consumption is high.
• C) indicates by how much first-period consumption changes for a one-unit change in first-period income.
• D) reveals the rate at which the consumer is willing to substitute second-period consumption for first-period consumption.

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Definitions:

Merchandise

Goods that a business purchases to sell to customers in the ordinary course of its business; typically, items bought for resale.

Inventory

The raw materials, work-in-progress products, and fully finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Sales Tax Payable

Sales tax payable is a liability account that records the amount of sales tax collected by a company from customers, which is due to be paid to the governmental tax authority.

Liability Account

An account on the balance sheet representing an obligation to pay money or deliver goods or services to another entity in the future.