Why does mrt diminish as one good is substituted for the other?
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An important principle of economic theory is that marginal rate of substitution of X for y diminishes as more and more of good X is substituted for good K In other words as the consumer has more and more of good X he is prepared to forego less and less of good Y The principle of diminishing marginal rate of .The marginal rate of substitution is always changing for a given point on the curve, and mathematically represents the slope of the curve at that point. ... The Law of Diminishing Marginal Rates of Substitution states that MRS decreases as one moves down the standard convex-shaped curve, which is the indifference curve.
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because Marginal rate of transformation. The marginal rate of transformation (MRT) can be defined as how many units of good x have to stop being produced in order to produce an extra unit of good y, while keeping constant the use of production factors and the technology being used.
and the economy cannot produce both goods at the same time and mrt diminishes.
and the economy cannot produce both goods at the same time and mrt diminishes.
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