MRS A - Surname 1 Name of the student Name of the professor...

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Surname 1 Name of the student Name of the professor Subject Date Marginal rate of substitution Marginal rate of substitution is the amount (units) of a good a consumer is willing to give up in order to obtain an extra unit of another good, while keeping the same utility level. For two goods, say X and Y, the marginal rate of substitution of X for Y (MRS XY ) (MRS Y X = (d y /d x )is the amount of Y for which a consumer is ready to locally exchange X. Owing to the neoclassical economics assumption that goods are continuously divisible, MRS is the same regardless of the direction of change and corresponds to the slope of an indifference curve passing through a given consumption bundle. As more of one good is consumed, less of the other good is consumed in each consumption bundle. This gives an inverse relationship and explains the negative value of the slope of the indifference curve. It is important to note that despite the amount of goods a
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