Economics, 3rd Edition

Th

C

’ P

FIGURE 5.6

Quantity

of cola

Quantity

of pizza

A

E

D

B

C

I

1

I

2

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110  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

To induce the consumer to give up 1 pizza, the consumer has to be given 6 litres of cola: the marginal rate 

of substitution is 6 litres per pizza. By contrast, at point B, the consumer has little cola and a lot of pizza, so 

he is very thirsty but not very hungry. At this point, he would be willing to give up 1 pizza to get 1 litre of 

cola: the marginal rate of substitution is 1 litre per pizza. Thus, the bowed shape of the indifference curve 

reflects the consumer’s greater willingness to give up a good that he already has in large quantity.