Decreasing MRS as a Good Becomes More Abundant (Horizontal Movement)
When the quantity of one good (plotted on the horizontal axis, like free time) increases while the quantity of another good (on the vertical axis, like consumption) is held constant, the indifference curves become flatter. This indicates a lower Marginal Rate of Substitution (MRS). The underlying principle is that as a good becomes more plentiful, an individual's willingness to sacrifice the other, now relatively scarcer, good for an additional unit of the abundant one diminishes.
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Learn After
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