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As we increase the production of one good, we sacrifice progressively more of the other.

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What is Marginal Rate of Substitution?

marginal rate of substitution


Law of diminishing marginal rate of substitution?

Marginal rate of substitution tends to decrease with passage of units consumptions.


Is the height of an indifference curve the marginal rate of substitution?

Yes. The height of an indifference curve is the marginal rate of substitution.


What is the difference between marginal rate of substitution and marginal rate of technical substitution?

marginal rate of substitution is the slope of the indifference curve. It is the rate at which the consumer is willing to give up certain units of a good in order to get an additional unit of another good. it is equal to the ration of the Marginal Utilities of the 2 goods. marginal rate of transformation is the slope of the production possibiltiy frontier. it is the rate at which the producer is willing to give up the production of certain units of a good in order to increase the prpduction of the other good by 1 unit ( by shifting the inputs more towards the production of the last good). it is equal to the ratio of the marginal costs of the 2 goods.


Why does the marginal rate of substitution diminish?

As a matter of fact, law of diminishing marginal rate of substitution conforms to the law of diminishing marginal utility. According to law of diminishing marginal utility, as a consumer increases the consumption of a good, its marginal utility goes on diminishing. On the contrary, if the consumption of a good decreases, its marginal utility goes on increasing.

Related Questions

What is Marginal Rate of Substitution?

marginal rate of substitution


What is Definition marginal rate of substitution?

marginal rate of substitution


Law of diminishing marginal rate of substitution?

Marginal rate of substitution tends to decrease with passage of units consumptions.


Is the height of an indifference curve the marginal rate of substitution?

Yes. The height of an indifference curve is the marginal rate of substitution.


What is the relevant tax rate for investment decisions?

Marginal Rate


What is the difference between marginal rate of substitution and marginal rate of technical substitution?

marginal rate of substitution is the slope of the indifference curve. It is the rate at which the consumer is willing to give up certain units of a good in order to get an additional unit of another good. it is equal to the ration of the Marginal Utilities of the 2 goods. marginal rate of transformation is the slope of the production possibiltiy frontier. it is the rate at which the producer is willing to give up the production of certain units of a good in order to increase the prpduction of the other good by 1 unit ( by shifting the inputs more towards the production of the last good). it is equal to the ratio of the marginal costs of the 2 goods.


Why does the marginal rate of substitution diminish?

As a matter of fact, law of diminishing marginal rate of substitution conforms to the law of diminishing marginal utility. According to law of diminishing marginal utility, as a consumer increases the consumption of a good, its marginal utility goes on diminishing. On the contrary, if the consumption of a good decreases, its marginal utility goes on increasing.


How can one determine the marginal rate of substitution in economics?

In economics, the marginal rate of substitution can be determined by calculating the ratio of the marginal utility of one good to the marginal utility of another good. This ratio represents the rate at which a consumer is willing to trade one good for another while maintaining the same level of satisfaction.


What happens to the marginal product when the total product is increasing but at a decreasing rate?

When the total product is increasing but at a decreasing rate, the marginal product will also decrease.


What is the name of the tax rate at which additional income is taxed?

Your marginal rate as compared to your effective rate.


Difference between marginal efficiency of investment and marginal efficicency of capital?

MEC is the expected rate of return on capital and MEI is the expected rate of return on investment.


What is the definition of the marginal rate of technical substitution?

The marginal rate of technical substitution is the rate at which one input can be substituted for another input in a production process while keeping the level of output constant.