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How do you properly figure out the MRS along a budget line, I do not know how to correctly figure it out, since I end up with the same MRS all along the line.

2007-09-16 15:59:09 · 2 answers · asked by Anonymous in Social Science Economics

2 answers

Since the budget line is linear, the slope IS a constant, and the MRS IS a constant. Utility is maximized where the utility curve is tangent to the budget line, that is where the slope of the Utility curve is equal to that constant.

2007-09-16 23:10:56 · answer #1 · answered by meg 7 · 0 0

Marginal rate of Substitution is essentially the slope of the line... if the *line* is linear, you will have the same MRS. If the line is actually a curve, then the MRS can change along the curve depending on the different quantity.

2007-09-17 00:26:11 · answer #2 · answered by easymac 4 · 0 0

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