Term
| Marginal Rate of Substitution (MRS) |
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Definition
| The rate at which a consumer is willing to substitute one good for another good and still maintain the same level of satisfaction. |
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Term
| Marginal Rate of Substitution for X with Y (MRSxy)(Definition) |
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Definition
| The amount of Y a person is willing to give up to get one more unit of X. |
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Term
| Marginal Rate of Substitution for X with Y (MRSxy)(Formula) |
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Definition
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Term
| Diminishing Marginal Utility |
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Definition
| As a person gains more units of a good, the value of each new unit is lower than the one before |
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Term
| Four Assumptions of Indifference Curve Analysis |
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Definition
Completeness
More Is Better
Diminishing Marginal Rate of Substitution
Transitivity |
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Term
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Definition
| U = f(X, Y) where X is the amount of good X that you consume, and Y is the amount of good Y that you consume |
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Term
| Change in Utility (Formula) |
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Definition
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Term
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Definition
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Term
| The Market Rate of Substitution |
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Definition
| The rate at which one good can be exchanged for another at current market prices. |
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Term
| The Market Rate of Substitution for X with Y (Description) |
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Definition
| The amount of Y which must be given up in order to get one more unit of X, given a fixed budget and market prices. |
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Term
| The Market Rate of Substitution for X with Y (Formula) |
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Definition
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Term
| Utility Maximizing Condition |
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Definition
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