Marginal Rate of Substitution Calculator

Formula

The formula to calculate the Marginal Rate of Substitution (MRS) is:

\[ \text{MRS} = \frac{\text{MUx}}{\text{MUy}} \]

Where:

MRS is the Marginal Rate of Substitution
MUx is the marginal utility of good X
MUy is the marginal utility of good Y

What is Marginal Rate of Substitution?

A marginal rate of substitution is a measure of the amount of a product that a consumer is willing to purchase or consume based on the consumption of another product. It essentially measures the effect the consumption of one good has on the consumption of a separate but related good.

Example Calculation

Let's assume the following:

Marginal Utility of Good X (MUx): 0.56
Marginal Utility of Good Y (MUy): 0.45

Step 1: Calculate the Marginal Rate of Substitution (MRS):

\[ \text{MRS} = \frac{0.56}{0.45} \approx 1.24444 \]

Therefore, the Marginal Rate of Substitution is approximately 1.24444.