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Q36 (CAPF/2014) Economy › Basic Concepts & National Income › Consumer theory basics Answer Verified

The rate at which the consumer is willing to substitute one good for another without changing the level of satisfaction is known as :

Result
Your answer: —  Â·  Correct: A
Explanation

The Marginal Rate of Substitution (MRS) is defined as the rate at which a consumer is willing to substitute one good for another while maintaining the same level of total utility or satisfaction [1]. It represents the amount of one commodity a consumer must forego to obtain an additional unit of another commodity, keeping the overall satisfaction constant [1]. Graphically, the MRS is the absolute value of the slope of the indifference curve at any given point [3]. While the Marginal Rate of Technical Substitution (MRTS) is a similar concept, it applies to production theory rather than consumer satisfaction . The law of diminishing marginal utility explains why the MRS typically declines as a consumer increases consumption of one good, leading to the convex shape of indifference curves [2].

Sources

  1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.1.2 Ordinal Utility Analysis > p. 11
  2. [3] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.3 OPTIMAL CHOICE OF THE CONSUMER > p. 19
  3. [2] https://en.wikipedia.org/wiki/Marginal_rate_of_substitution
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