Question

What is a diminishing marginal rate of substitution?

Answer 1

The marginal rate of substitution is the rate of exchange between some units of goods X and У which are equally preferred. The marginal rate of substitution of X for Y (MRS)xy is the amount of Y that will be given up for obtaining each additional unit of X. Diminishing rate of substitution is another term used for marginal rate of substitution. Marginal rate of substitution is the rate at which consumer will give up a quantity of goods for the exchange of another good.