Question

2. What's the definition of marginal rate of substitution? What happens to the MRS as you move along a convex indifference curve? A linear indifference curve?

Answer 1

The marginal rate of substitution (MRS) is the amount of one good a consumer is willing to forgo for more units of another good, with both goods giving same utility. The Marginal Rate of Substitution is the slope of the indifference curve.

According to the law of diminishing marginal rate of substitution, the MRS decreases as consumer moves down a standard convex-shaped indifference curve.

With a linear indifference curve, the slope will be constant as we move along the indifference curve. Hence, the marginal rate of substitution is constant in the case of a linear indifference curve.