A consumer is indifferent among the bundles (1 banana, 15 mangoes), (2, 10), (3, 7) and (4, 5). What is her marginal rate of substitution of bananas for mangoes when she moves from the third bundle to the fourth?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 2
Given:
Third bundle: 3 bananas, 7 mangoes
Fourth bundle: 4 bananas, 5 mangoes
MRS = mangoes given up for one more banana, utility staying the same.
Change in mangoes = 5 − 7 = −2
Change in bananas = 4 − 3 = 1
MRS = |−2/1| = 2
The MRS falls from 5 to 3 to 2 along the curve: this is the diminishing MRS.
NCERT (2026-27): “2.1.2 Ordinal Utility Analysis … It is clear that when a consumer gets one more banana, he has to forego some mangoes, so that her total utility level remains the same and she remains on the same indifference curve. Therefore, indifference curve slopes downward. The amount of mangoes that the consumer has to forego, in order to get an additional banana, her total utility level being the same, is called marginal rate of substitution (MRS). In other words, MRS is simply the rate at which the consumer will substitute bananas for mangoes, so that her total utility remains constant. …” |