GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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two goods for which the marginal rate of substituion of one of the other is constant are called
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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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Explanation:
Detailed explanation-1: -The correct answer is: D) the goods are perfect substitutes.
Detailed explanation-2: -Constant MRS occurs when there is a perfect substitute for both goods X and Y. On the indifference curve, the MRS is equal to one because the lines are parallel.
Detailed explanation-3: -If two goods are perfect substitutes, their prices (per comparable unit) must be the same if both are to be used: the elasticity of substitution between them is infinite, and any price difference will lead to all consumers choosing the cheaper. An indifference curve between them is a straight line.
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