Question

explain the concept of MRS with the help of a numerical example

Answer 1

MRS or Marginal Rate of Substitution is the rate at which one good is substituted for the other. In consumer theory, MRS of an IC is the rate at which consumer is willing to sacrifice units of one good for an extra unit of another good. MRS is the slope of the indifference curves.
For instance, a consumer has a fixed level of income and he has to allocate his income among Food and other goods. So an IC can be made for food as one good and “other goods” as another.
When a consumer moves down an IC then this means he is consuming more of the good taken at X-axis and sacrificing more units of good at Y-axis. There would be decrease in units being sacrificed since marginal utility derived from the good at X-axis would be diminishing as more of that good is being consumed. This would also mean MRS will also decrease.
MRS= -MUx/MUy