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MARGINAL RATE OF SUBSTITUTION

17 四月, 2015 - 17:30

The quantity of one good an individual must forego in order to increase the quantity of another good and leave the individual indifferent, is called the marginal rate of substitution. This marginal rate of substitution is shown graphically as the tangent to the indifference curve. The marginal rate of substitution is decreasing. This verifies that the indifference curves are convex as seen from the origin.