GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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1.perfect substitutes
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2.perfect complements
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3.perfect elastic
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4.none of the above
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Detailed explanation-1: -If the marginal rate of substitution between two goods is zero, these goods are perfect substitutes.
Detailed explanation-2: -MRS moves to zero as it diminishes the number of units of good X, and to infinity, as it diminishes the number of units of good Y.
Detailed explanation-3: -Therefore, the marginal rate of substitution is zero because the two goods X and Y are consumed in the fixed ratio1:1 which is indicated by the slope of the ray OS at point B.
Detailed explanation-4: -The MRS will be zero or equal to infinity in those cases when one of the goods is a good, and the other is a neutral good, the marginal utility of consumption of which for the consumer is equal to zero.
Detailed explanation-5: -The indifference curves for perfect complements will always be right angles.