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Marginal Rate of Substitution

  1. Oct 12, 2008 #1
    I understood the concept and definition of marginal rate of substitution , and also
    MRS = -(dy/dx) , but why is dy/dx never positive ?
     
  2. jcsd
  3. Oct 13, 2008 #2

    EnumaElish

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    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.
     
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