Enter the utility values of two goods into the MRS calculator to determine the marginal rate of substitution.
Marginal Rate of Substitution Formula
The following formula is used to calculate the marginal rate of substitution (MRS).
MRS = Utility of Good 1 / Utility of Good 2
Variables:
- MRS is the marginal rate of substitution
- Utility of Good 1 is the utility derived from good 1
- Utility of Good 2 is the utility derived from good 2
To calculate the MRS, divide the utility of good 1 by the utility of good 2.
What is Marginal Rate of Substitution?
The marginal rate of substitution (MRS) refers to the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility. It reflects the consumer’s preferences and is used to analyze consumer choice and demand.
How to Calculate Marginal Rate of Substitution?
The following steps outline how to calculate the marginal rate of substitution using the given formula.
- First, determine the utility values for the two goods you are comparing.
- Next, use the formula: MRS = Utility of Good 1 / Utility of Good 2.
- Finally, calculate the MRS by plugging in the values.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem:
Use the following variables as an example problem to test your knowledge.
Utility of Good 1 = 100
Utility of Good 2 = 50
FAQ
1. What is the marginal rate of substitution?
The marginal rate of substitution is the rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction.
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