Why does mrs diminish 1 the want for a particular

Why does MRS diminish?

Consumption Possibilities-
Budget Line

Budget Line
Budget Line Equation,
Where,
Px= per unit price of commodity X
Py = per unit price of commodity Y
X = amount of commodity X
Y= amount of commodity Y
M= stands for money income
> The vertical intercept or y-intercept
is M/P
y
That is,
> The horizontal intercept or x-intercept
is M/P
y
That is,

– Y)
y

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Example
Suppose, consumer has got income of tk 50, the price of
commodity X and Y is tk 10 and tk 5 respectively.
The budget line becomes:
•
The vertical intercept is: 50/5=10
•
The horizontal intercept is: 50/10= 5
•
The slope of BL is:

Effect of Changes in Price on Budget Line
Suppose BL is the original budget line for given certain prices
of goods X and Y and certain income.
•
if Px falls and all other things remain same,
consumer will be able to buy more of good X than
before with his income. The quantity of X increases
from OL to OL’. Since the price of Y remains same
the quantity of Y purchase will remain same, as OB.
And there will be no shift of point B. As a result the
BL line rotates to the right, and the new budget line
is OL’.
•
On the other hand if Px rises and all other things
remain same, consumer will be able to buy less of
good X than before with his income. The quantity
of X decreases from OL to OL’’. Since the price of