The marginal rate of substitution, or MRS, is the rate at which a consumer is ready to give up one product in exchange for another while maintaining the same satisfaction.
Formula
MRS for two goods, X and Y, is denoted as MRS of X for Y. It is the quotient of change in the quantity of Good Y and the quantity of Good X while maintaining the same level of satisfaction.
MRSXY = – (ΔY/ ΔX)
Where,
MRSXY is MRS of X for Y
ΔY is the change in the quantity of Good Y
ΔX is the change in the quantity of Good X
MRS as the slope of the indifference curve
MRS represents the slope of an indifference curve at a particular point. An indifference curve is not a straight line but a curve, as the slope varies at different points. To find MRS at a particular point, a tangent line can be drawn. The slope of the tangent line represents the slope of the indifference curve at that combination of goods X and Y.
