what is different between elasticity of demand and marginal substitution?
Answers
Explanation:
Elasticity of substitution is the elasticity of the ratio of two inputs to a production (or utility) function with respect to the ratio of their marginal products (or utilities).[1] In a competitive market, it measures the percentage change in the ratio of two inputs used in response to a percentage change in their prices.[2] It measures the curvature of an isoquant and thus, the substitutability between inputs (or goods), i.e. how easy it is to substitute one input (or good) for the other.
In economics, the marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. At equilibrium consumption levels (assuming no externalities), marginal rates of substitution are identical. The marginal rate of substitution is one of the three factors from marginal productivity, the others being marginal rates of transformation and marginal productivity of a factor.[1]
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