3.2.1 Indifference curves and the marginal rate of substitution Since three- dimensional diagrams are awkward to handle, economists analyse We shall give an example of a utility function displaying diminishing MRS in the next section. 23 Jul 2012 The marginal rate of substitution (MRS) can be defined as how many when diminishing the quantity of X2 and to infinite when diminishing the  We use this measure referred to as the Marginal rate of substitution (MRS) to quantify the amount of one good that a consumer is willing to give up to obtain more 

However, the marginal rate of substitution is constant, and, therefore, this utility function does not satisfy the property of diminishing marginal rate of substitution. This is an everyday illustration of the law of diminishing marginal utility. Diagrams of total and marginal utility curves, and how they are related. an indifference curve represents the marginal rate of substitution (MRS) of one product for the  In the third combination, the consumer is willing to sacrifice only 3 units of good Y for getting another unit of good X. The MRS is 3:1. Likewise, when the consumer moves from 4 th to 5 th combination, the MRS of good X for good Y falls to one (1:1). This illustrates the diminishing marginal rate of substitution. That the marginal rate of substitution of X for Y diminishes can also be known from drawing tangents at different points on an indifference curve. ADVERTISEMENTS: The marginal rate of substitution at a point on the indifference curve is equal to the slope of the indifference curve at that point and can therefore be found out by ate tangent of the angle which the tangent line made with the X-axis. If the marginal rate of substitution of X for Y or Y for X is diminishing, the indifference’ curve must be convex to the origin. If it is constant, the indifference curve will be a straight line sloping downwards to the right at a 45° angle to either axis.

This behavior of the consumer is called principle of diminishing marginal rate of substitution. Diagram. The slope of indifference curve measures the marginal rate of substitution. It is negative and falling from left down to the right that shows the law of diminishing marginal rate of substitution.

The Marginal Rate of Substitution of Good X for Good Y (MRSxy) = ∆Y/ ∆X (which is just the slope of the indifference curve). The Principle of Diminishing Marginal Rate of Substitution The MRS of Good X for Good Y diminishes as more and more of Good X is substituted for Good Y. Diminishing Marginal Rate of Technical Substitution: The decline in MRTS along an isoquant for producing the same level of output is named as diminishing marginal rates of technical education. As we have seen in Fig. 12.8, that when a firm moves down from point (a) to point (b) and it hires one more labor, the firm gives up 4 units of capital (K) and yet remains on the same isoquant at point (b). To have the second combination and yet to be at the same level of satisfaction, the consumer is prepared to forgo 3 units of Y for obtaining an extra unit of X. The marginal rate of substitution of X for У is 3:1. The rate of substitution will then be the number of units of У for which one unit of X is a substitute. If the marginal rate of substitution of X for Y or Y for X is diminishing, the indifference’ curve must be convex to the origin. If it is constant, the indifference curve will be a straight line sloping downwards to the right at a 45° angle to either axis, as in Fig. The marginal rate of technical substitution (MRTS) is an economic theory that illustrates the rate at which one factor must decrease so that the same level of productivity can be maintained when another factor is increased. The MRTS reflects the give-and-take between factors, PRINCIPLE OF DIMINISHING MARGINAL RATE OF SUBSTITUTION The diagram of an Cinderella curve given already is a typical one. From the following paragraph’. it would become clear why indifference curves ‘norm have this shape. Besides, we shall notice the properties of typical indifference curves.

do a pretty diagram, so you'll have to deal with my ugly handwriting here. So why concept is you have diminishing marginal rate of substitution. The rate at 

PRINCIPLE OF DIMINISHING MARGINAL RATE OF SUBSTITUTION The diagram of an Cinderella curve given already is a typical one. From the following paragraph’. it would become clear why indifference curves ‘norm have this shape. Besides, we shall notice the properties of typical indifference curves. This behavior showing falling MRS of good X for good Y and yet to remain at the same level of satisfaction is known as diminishing marginal rate of substitution. Diagram/Figure: The concept of marginal rate of substitution (MRS) can also be illustrated with the help of the diagram. This behavior of the consumer is called principle of diminishing marginal rate of substitution. Diagram. The slope of indifference curve measures the marginal rate of substitution. It is negative and falling from left down to the right that shows the law of diminishing marginal rate of substitution. The Marginal Rate of Substitution (MRS) is defined as the rate at which a consumer is ready to exchange a number of units good X for one more of good Y at the same level of utility. The Marginal Rate of Substitution is used to analyze the indifference curve.

An important principle of economic theory is that marginal rate of substitution of X for Y diminishes as more and more of good X is substituted for good Y. In other 

This behavior of the consumer is called principle of diminishing marginal rate of substitution. Diagram. The slope of indifference curve measures the marginal rate of substitution. It is negative and falling from left down to the right that shows the law of diminishing marginal rate of substitution. The Marginal Rate of Substitution of Good X for Good Y (MRSxy) = ∆Y/ ∆X (which is just the slope of the indifference curve). The Principle of Diminishing Marginal Rate of Substitution The MRS of Good X for Good Y diminishes as more and more of Good X is substituted for Good Y. Diminishing Marginal Rate of Technical Substitution: The decline in MRTS along an isoquant for producing the same level of output is named as diminishing marginal rates of technical education. As we have seen in Fig. 12.8, that when a firm moves down from point (a) to point (b) and it hires one more labor, the firm gives up 4 units of capital (K) and yet remains on the same isoquant at point (b). To have the second combination and yet to be at the same level of satisfaction, the consumer is prepared to forgo 3 units of Y for obtaining an extra unit of X. The marginal rate of substitution of X for У is 3:1. The rate of substitution will then be the number of units of У for which one unit of X is a substitute. If the marginal rate of substitution of X for Y or Y for X is diminishing, the indifference’ curve must be convex to the origin. If it is constant, the indifference curve will be a straight line sloping downwards to the right at a 45° angle to either axis, as in Fig.

Along an indifference curve there is a diminishing marginal rate of substitution. The MRS went from 6 to 4 to 1. Page 19. Chapter 3.

In the third combination, the consumer is willing to sacrifice only 3 units of good Y for getting another unit of good X. The MRS is 3:1. Likewise, when the consumer moves from 4 th to 5 th combination, the MRS of good X for good Y falls to one (1:1). This illustrates the diminishing marginal rate of substitution. That the marginal rate of substitution of X for Y diminishes can also be known from drawing tangents at different points on an indifference curve. ADVERTISEMENTS: The marginal rate of substitution at a point on the indifference curve is equal to the slope of the indifference curve at that point and can therefore be found out by ate tangent of the angle which the tangent line made with the X-axis. If the marginal rate of substitution of X for Y or Y for X is diminishing, the indifference’ curve must be convex to the origin. If it is constant, the indifference curve will be a straight line sloping downwards to the right at a 45° angle to either axis. This behavior showing falling MRS of good X for good Y and yet to remain at the same level of satisfaction is known as diminishing marginal rate of substitution. Diagram/Figure: The concept of marginal rate of substitution (MRS) can also be illustrated with the help of the diagram. This behavior of the consumer is called principle of diminishing marginal rate of substitution. Diagram. The slope of indifference curve measures the marginal rate of substitution. It is negative and falling from left down to the right that shows the law of diminishing marginal rate of substitution. The Marginal Rate of Substitution of Good X for Good Y (MRSxy) = ∆Y/ ∆X (which is just the slope of the indifference curve). The Principle of Diminishing Marginal Rate of Substitution The MRS of Good X for Good Y diminishes as more and more of Good X is substituted for Good Y. Diminishing Marginal Rate of Technical Substitution: The decline in MRTS along an isoquant for producing the same level of output is named as diminishing marginal rates of technical education. As we have seen in Fig. 12.8, that when a firm moves down from point (a) to point (b) and it hires one more labor, the firm gives up 4 units of capital (K) and yet remains on the same isoquant at point (b).

PRINCIPLE OF DIMINISHING MARGINAL RATE OF SUBSTITUTION The diagram of an Cinderella curve given already is a typical one. From the following paragraph’. it would become clear why indifference curves ‘norm have this shape. Besides, we shall notice the properties of typical indifference curves.