Question : Assertion: The concept of the marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while maintaining the same level of satisfaction.
Reason: The MRS is determined by the consumer's preferences and the relative marginal utilities of the two goods.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Option 2: Both the assertion and reason are true, but the reason is not a correct explanation of the assertion.
Option 3: The assertion is true, but the reason is false.
Option 4: The assertion is false, but the reason is true.
Correct Answer: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Solution : The correct option is (a) Option A Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
The concept of the marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while maintaining the same level of satisfaction. It represents the amount of one good that a consumer is willing to give up in exchange for an additional unit of another good, while keeping the overall utility or satisfaction constant.
The MRS is determined by the consumer's preferences and the relative marginal utilities of the two goods. The consumer's willingness to trade one good for another depends on their individual preferences and the additional utility or satisfaction they derive from consuming each good. If the consumer perceives a higher marginal utility from one good compared to the other, they will be willing to trade more units of the latter good for each unit of the former.
Question : Assertion: The slope of the budget line represents the relative price of two goods in the consumer's consumption bundle.
Reason: The consumer chooses a consumption bundle where the marginal rate of substitution equals the relative price of the goods.
Question : Assertion: The concept of marginal utility is only applicable in the case of discrete goods.
Reason: Marginal utility measures the additional satisfaction obtained from consuming an additional unit of a good.
Question : Assertion: A consumer maximizes utility by consuming goods until the marginal utility per unit of money spent is equal across all goods.
Reason: The consumer aims to allocate their budget in a way that maximizes their overall satisfaction.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion
Question : Assertion: The concept of marginal utility becomes irrelevant when the consumer faces perfect competition.
Reason: In perfect competition, the consumer is a price taker and must accept the market price without considering individual preferences.
Question : Assertion: The law of diminishing marginal utility states that as a consumer consumes more of a good, the additional satisfaction derived from each additional unit of the good decreases.
Reason: This occurs because the consumer's needs and wants for the good are limited.
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