Suppose that there are only two goods, books and coffee. Wally gets utility from

Question

Suppose that there are only two goods, books and coffee. Wally gets utility from both books and coffee, but his indifference curves between them are concave rather than convex to the origin. Draw his indifference curves to help you answer the following question: What do these particular indifference curves tell you about Wally's marginal rate of substitution between books and coffee?

Wally's MRSBC increases as he consumes more books.

Wally's MRSBC decreases as he consumes more books.

Wally's MRSBC increases as he consumes more coffee.

Wally's MRSBC is constant as he consumes more books.

Explanation / Answer

Wally's MRSBC increases as he consumes more books.

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