What s going on with the marginal rate of substitution of commodities in economics

The marginal rate of substitution of goods.

It refers to the consumption quantity of another commodity that consumers need to give up when they increase the consumption quantity of a unit of a certain commodity under the condition of maintaining the same level of utility, and the expression formula is:

mrs（12）=-_x1/_x2。

where x1 and x2 are the changes in commodity 1 and commodity 2, respectively. Since x1 is the increase and x2 is the decrease, the two signs must be opposite, so in order to make the MRS calculation result a positive number for comparison, a negative sign is added before the formula.

Marginal substitution rate of goods.

For example, if you are hungry and want to eat, do you eat a big meal or find a stall?

The substitutability of different goods and services with each other. Under the premise of maintaining the same level of utility, as the quantity of consumption of one good continues to increase, the consumption of another good that consumers need to give up in order to obtain one unit of this good decreases.

The quantity of another good that a consumer must give up when he adds one unit of a commodity.

For example, 2 bowls of ramen for 2 mouthfuls = 8 steamed buns. Before you have enough to eat your wife, if you choose ramen, you will reduce the purchase of 4 buns; If you choose steamed buns, you need to reduce the order for 1 bowl of ramen.

Upstairs is very correct is the absolute value of the slope of the e-indifference curve, which represents the quantity of another good that can be replaced by increasing the consumption of one unit of one good, provided that the level of consumer utility remains constant. If rcs represents the marginal substitution rate of commodities, then the marginal substitution rate of commodity 1 versus commodity 2 can be expressed as: rcs1,2= δq2 δq1|u=u0With the increase of the quantity of the first commodity, the marginal substitution rate of commodity 1 to commodity 2 decreases.

It refers to the consumption quantity of another good that consumers need to give up when they increase the consumption quantity of one unit of a certain commodity while maintaining the same level of utility, which is called the marginal substitution rate of goods.

The marginal rate of substitution is the amount of Y that a consumer must give up for every 1 unit x added in order to assume that the consumer consumes x and y goods at the same level of utility.

For example, if the consumer is asked to give up 2 units of good y, 4 units of x must be added to keep the consumer at the same level of utility, which means that every 1 unit of x can be added to replace 0 while keeping the utility level constant. 5 units of y, so the marginal rate of substitution is 0.

5。Thus, the marginal rate of substitution is actually the rate at which the consumer is willing to accept the exchange of two goods, because according to this rate, the consumer's level of utility can remain the same.

An important feature of the marginal rate of substitution is that with the increase in the quantity consumed of one good (e.g., x), the quantity of consumption of another good (y) that consumers must give up in order to obtain each unit of the good decreases, which is the so-called law of diminishing marginal rate of substitution.

The reason behind the diminishing marginal rate of substitution is the diminishing marginal utility, because as the quantity of commodity x increases, the marginal utility of x becomes smaller and smaller, and as the quantity of commodity y decreases, the marginal utility of commodity y increases, and in this case, the amount of y that can be replaced by each additional unit of x will of course be less and less.

The upstairs is very detailed and accurate, and I would like to add a simple formula: the marginal substitution law of x (compensator) vs. y (substitute) = y (decrease) x (increase).

The marginal rate of substitution (MRS) refers to the ratio at which consumers need to increase the consumption quantity of one unit of one good and another good to increase one unit of one item under the premise that two goods can be replaced at a certain rate (i.e., on the same indifference curve). The marginal effect refers to the fact that when other inputs are fixed, the new output or benefit will gradually decrease when one input is continuously increased. That is, when the increase in input exceeds a certain level, the output per unit of additional input decreases.

To put it simply, the total price of two commodities is equal, and the unit price ratio of two commodities is equal to the inverse ratio of quantity.

known by mux= tux x, tux=mux* x, similarly, tuy=muy* y; The marginal substitution rate requires the point to move on the indifference curve, which means tu= tux+ tuy=0, i.e. mux* x+ muy* y=0, move muy* y to the right end of the equation with mux* x=- muy* y, and the equation is transformed to - y x=mux muy, i.e. mrsxy= mux muy

The marginal rate of substitution is calculated

Generally, MRS (marginal rate of substitution) is used to express the marginal substitution rate of commodities, and the formula for calculating the split is as follows:

mrs=mu1/mu2=-(x2/δx1)=p1/p2

This means giving up the second commodity δx2 Zhiyuanbi units and obtaining the first commodity δx1 unit, preceded by a negative sign to make the marginal substitution rate positive.

When the change in the quantity of goods tends to infinity, the above formula can be expressed as: mrs= -dx2 dx1).

Indicates indifference curves.

The marginal substitution rate of a point is the absolute value of the tangent slope of that point on the indifference curve.

It measures the proportion of substitution between two goods in order to maintain the same level of satisfaction when moving from one point on the indifference curve to another. The marginal substitution rate is a point concept, that is, it has different values at each point on the indifference curve. The marginal substitution rate at any point on the indifference curve is equal to the absolute value of the slope of the indifference curve at that point.

The marginal substitution rate is negative because in order to ensure that the level of utility remains constant, it is necessary to increase the quantity of one good x consumed while reducing the amount of consumption of another good y. As the amount of x consumed increases, the amount of y good that can be replaced by adding one unit of x decreases due to the decreasing marginal utility of that good.

That is, the number of goods y that consumers are willing to give up in order to get one unit of x is decreasing. This is the law of diminishing marginal substitution rate. It can be seen that the existence of the law of diminishing marginal rate of substitution is due to the law of diminishing marginal utility.

Be caused by. This is essentially the root cause of the typical indifference curve convex to the origin.

However, it should be noted that with the change of the nature of the product or the particularity of consumer preference, the indifference curve does not necessarily convex to the origin.

The marginal rate of substitution (MRS) refers to the amount of consumption of another good that consumers need to give up to increase the consumption of one unit of a certain article under the premise that two goods can be replaced at a certain rate (i.e., on the same indifference curve) under the premise of maintaining the same degree of satisfaction (i.e., on the same indifference curve). The marginal substitution rate can be graphically represented by the slope of the line connecting two points on an indifference curve.

Reasons for decline: As the quantity of a good consumed gradually increases, the consumer's desire to get more of that good decreases, so that he is willing to give up less and less of another good in order to get an extra unit of this good.

The marginal substitution rate refers to the amount of another commodity that consumers are willing to give up in order to increase the number of units of a certain commodity on the premise of maintaining the same level of consumer satisfaction.

If the two goods are completely complementary to the consumer, then the corresponding indifference curve is in a right-angle shape, and the marginal substitution rate of the indifference curve part parallel to the horizontal axis is mrsxy=0, and the marginal substitution rate of the product mpsxy=

Examples of marginal rates of substitution:

For example, rice and noodles in food: the use value of rice decreases marginally from 1 bowl to 5 bowls of rice, so that it has no use value. The edible (using) effect of replacing a bowl of rice with a bowl of noodles.

Two padded jackets and a down jacket, subway and two cars, computers and dual-SIM phones, etc. The two relationships are interconnected.

The marginal rate of substitution of a good depends on the ratio of marginal utility.

Specifically, if the marginal utility of a commodity is high, the trembling branch judgment indicates that consumers are more willing to buy the commodity, and the ratio of reducing the consumption of another commodity to increase the consumption of the commodity will be smaller, that is, the marginal substitution rate of the commodity is lower. Conversely, if the marginal utility of a commodity is low, it means that consumers are less willing to buy the commodity, and the proportion of decreasing the consumption of another commodity to increase the consumption of the commodity will be larger, that is, the marginal substitution rate of the commodity is higher.

The marginal rate of substitution of a good is the ratio required to increase the consumption of one good and decrease the consumption of another while keeping the total utility constant.