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JAMB Economics 2002 Question 3

Question 3

Theory of Consumer Behaviour

In the diagram above, the marginal rate of substitution of X for Y for a movement from S to T is

Diagram for this question
  1. A.13:3
  2. B.1:5
  3. C.18:4
  4. D.5:1
Show the answer and explanation

Answer: D (5:1)

Explanation

Use the diagram. From S to T, Y falls from 18 to 13 (5 units) while X rises from 3 to 4 (1 unit), so 5 units of Y are given up for 1 of X: MRS = 5:1.