explain concept of mrs by giving an example what happens to mrs when consumer moves downward along indifference curve ? give reason
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Heya....
MRS means Marginal rate of substitution it refers to that rate at which consumer is willing to subsitute a good for other one...
It tends to decline when we move along Indifference Curve...
Because to law of diminishing marginal Utility...
Example....
At point A and B consumer is willing to give up 1.5 units of good Y for one more of good X...
But as move....
Consumer will give up 0.75 unit of Y for X.... so it declined
MRS means Marginal rate of substitution it refers to that rate at which consumer is willing to subsitute a good for other one...
It tends to decline when we move along Indifference Curve...
Because to law of diminishing marginal Utility...
Example....
At point A and B consumer is willing to give up 1.5 units of good Y for one more of good X...
But as move....
Consumer will give up 0.75 unit of Y for X.... so it declined
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