Question

1:3 Explain the meaning of MRS with the help of numerical example​

Answer 1

Answer:

MRS - Marginal Rate of Substitution

Explanation:

Marginal Rate of Substitution ( MRS ) means that the rate at which a consumer is willing to sacrifice quantity of one good to obtain one more unit of the other good . let the two goods consumed A and B . Suppose the following combinations of these two goods have same utility level for him

Good A. Good B. MRS

1. 8. -

2. 4. 4B : 1 A

3. 1. 3B : 1 A

The consumer is willing to sacrifice 4B to obtain second unit of A . For the third unit of A, he is willing to sacrifice less because marginal utility of A decreases as he consumes more of A.