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25 April, 05:16

What is the marginal rate of substitution (MRS) and why does it diminish as the consumer substitutes one product for another?

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  1. 25 April, 06:07
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    Marginal rate of substitution refers to the situation in which one product is substitute for another product. It means that if a person wants to consume more of one good then he have to sacrifice some quantity of other good.

    The marginal rate of substitution is reflected in the indifference curve of the consumer.

    The law of diminishing marginal rate of substitution refers to the law which states that the MRS goes on diminishing as consumer moved downward on the indifference curve.
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