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Marginal Rate of Substitution (MRS)

The rate at which a consumer is willing to give up one good (

y

) to obtain more of another good (

x

), while maintaining constant utility.

MRS_{xy} = - \frac{dy}{dx} = \frac{MU_x}{MU_y}

📜

The statement of the theorem

The Marginal Rate of Substitution (MRS) between goods

x

and

y

is defined as the absolute value of the slope of the indifference curve at any point

(x, y)

MRS_{xy} = \left| \frac{dy}{dx} \right| = - \frac{dy}{dx} \bigg|_{U=\bar{U}} = \frac{MU_x}{MU_y} = \frac{\partial U / \partial x}{\partial U / \partial y}

Source: Wikipedia