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    Marginal Rate of Substitution

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    I am a graduate student surviving on a limited income and my money income is $300 per month, the price of good X is $4, and the price of good Y is also $4. Given these prices and income, I buy 50 units of X and 25 units of Y. The combination of X and Y bundle J. At bundle J my marginal rate of substitution (MRS) is 2. At bundle J, if I increase consumption of Y by 1 unit, how many units of X can I give up and still reach the same level of utility?

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    The marginal rate of substitution (MRS for short) is the rate at which consumers are willing to give up units of one good in exchange ...

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    The expert examines the marginal rates of substitution.