Marginal Utility and MRS

Marginal Utility and MRS:

Assume that our original bundle is bundle C in our previous example, and that we add one unit of good 1 so that we end up with bundle B. The marginal utility of good 1 is then,

MU1 = ΔU/ΔQ1 = [U(B) – U(C)]/ ΔQ1

If we now add one unit of good 2 to bundle B, we end up with bundle A, and the change in utility is,

MU2 = ΔU/ΔQ2 = [U(B) – U(C)]/ ΔQ2

The actual numbers can easily be seen to be MU1 = 2, and MU2 = 3. But again these numbers have no specific meaning. However, let us take the ratio of these expressions,
Note that the last ratio is (the negative of) the marginal rate of substitution between good 1 and 2, hence,

MRS12 = - MU1/MU2

An important point here is that if we apply any of the transformation in the previous example, the marginal utilities would be affected by (most of) these transformations, but the MRS12, which shows the shape of the indifference curves, would not.

Latest technology based Economics Online Tutoring Assistance

Tutors, at the, take pledge to provide full satisfaction and assurance in Intermediate Microeconomics homework help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Intermediate Microeconomics, project ideas and tutorials. We provide email based Intermediate Microeconomics homework help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Intermediate Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Economics homework help and assignment help services. They use their experience, as they have solved thousands of the Economics assignments, which may help you to solve your complex issues of Intermediate Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.

©TutorsGlobe All rights reserved 2022-2023.