
Figure 4.5 The Slope of an Indifference Curve Is the Marginal Rate of Substitution
The marginal rate of substitution measures the willingness of a consumer to trade one good for the other. It is measured as the negative of the slope of the indifference curve at any point. At point
A, the slope of the curve is –2, meaning that the
MRS is 2. This implies that, for that given bundle, Sarah is willing to trade 2 burritos to receive 1 more latte. At point
B, the slope is –0.5 and the
MRS is 0.5. At this point, Sarah is only willing to give up 0.5 burritos to get another latte.