Advertisements
Advertisements
Question
What is diminishing marginal rate of substitution?
Short Answer
Solution
Indifference curve analysis is based on the assumption of diminishing marginal rate of substitution. This means that as the consumer substitutes more and more of one commodity (say X) for another commodity (say Y), he will be prepared to give up lesser units of the later (Y) for each additional unit of the former (X).
shaalaa.com
Is there an error in this question or solution?
