What would be the value of the Marginal Rate of Substitution (MRS) when Good-X increases by 5 with the decrease of Good-Y by 15?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → -3
Marginal Rate of Substitution (MRS) is calculated using the formula:
MRS = |ΔY / ΔX|
where
ΔY = change in Good-Y (decrease = -15)
ΔX = change in Good-X (increase = +5)
Now apply the values:
MRS = |−15 / 5| = |-3|
Note: there appears to be a mistake in the options. The value of the MRS is the absolute value of this slope, which is 3. However, there is no option of 3 and instead there is an option -3 which is marked as correct by NTA.