Marginal Rate of Substitution

[garyljc]

I understood the concept and definition of marginal rate of substitution , and also
MRS = -(dy/dx) , but why is dy/dx never positive ?

 

[EnumaElish]

The simplest explanation is to remember that MRS is the slope of an indifference curve. Your question is the same as "why does an indifference curve always slope downwards"? Think about the axes of the graph on which an indif. curve is plotted. What does a negative slope mean in terms of how y changes when you increase the amount of x? (What would it mean in terms of how x changes when you increase the amount of y?) How would your answers be different if the slope was positive? You should keep in mind that utility has to be constant on each indifference curve.

 

[Architeuthis Dux]

The marginal rate of substitution (MRS) is a concept used in economics to measure the rate at which a consumer is willing to substitute one good for another while keeping their overall level of satisfaction or utility constant. It is calculated as the negative of the slope of the indifference curve, which represents the combinations of goods that provide the same level of satisfaction to the consumer.

The reason why dy/dx, or the slope of the indifference curve, is never positive is because of the concept of diminishing marginal rate of substitution. This means that as a consumer consumes more and more of one good, the amount of the other good they are willing to give up for an additional unit of the first good decreases. In other words, the more of a good a consumer has, the less they are willing to give up for one more unit of it.

This can be explained by the law of diminishing marginal utility, which states that as a person consumes more of a good, the additional satisfaction they get from each additional unit decreases. Therefore, as a consumer consumes more of one good, their willingness to give up other goods to obtain more of it decreases, resulting in a negative slope for the indifference curve and a negative value for the MRS.

In conclusion, the MRS is always negative because of the concept of diminishing marginal rate of substitution, which reflects the consumer's decreasing willingness to give up other goods as they consume more of one particular good.