Question

The manager of a company was analysing the trend of the products of its company (Commodity Y) getting replaced by another substitute product available in the market which gives the same level of satisfaction to the consumers. Calculate the rate of Marginal Rate of Substitution and analyse the result Contribution A B C D E Commodity Y 40 25 17 10 7 Commodity X. 10 14 19 27 38

Answer 1

The concept of the marginal rate substitution (MRS) had been introduced by the great Dr. J.R. Hicks and Prof. R.G.D.

Allen in order to take place of another concept of the diminishing marginal utility. Prof. Allen and Dr. Hicks have the opinion that it is useless to measure the utility of a product.