Larry enjoys eating muffins and eclairs. The following graph displays one of Lar

Question

Larry enjoys eating muffins and eclairs. The following graph displays one of Larry's indifference curves (I1), which shows his preference for muffins and eclairs each month 39 67 11 21 MUFFINS Complete the following table by determining Larry's marginal rate of substitution (MRS) between the two points listed in each row. (Note: Although the MRS is technically always negative, enter a positive number in the following table since it asks for the amount of eclairs per muffin that represents Larry's MRS.) Marginal Rate of Substitution (Eclairs per muffin) Between Points... A and B C and D

Explanation / Answer

Indifference curve is a curve where the combination of goods will provide equal utility if they consumed in quantity given by indifference curve.

So, Every combination on indifference curve will provide same utility

Marginal rate of substitution tells how much amount of a good a consumer is willing to give up for another good if another good is equally statisfying.

In this question, we needs to find amount of amount of eclairs Larry wants to give up for single muffin

So MRS is equal to change in quantity of eclairs by change in quantity of muffin

a) If we move from point A to B then MRS = change in quantity of eclairs / change in quantity of muffin = (34-39)/(7-6) = -5/1 = -5

So Larry is willing to give up 5 eclairs for 1 muffin

Therefore, MRS = 5

b) If we move from point C to D then MRS = change in quantity of eclairs / change in quantity of muffin = (11-23)/(21-11) = -12/10 = -1.2

So Larry is willing to give up 1.2 eclairs for 1 muffin

Therefore, MRS = 1.2

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