What is marginal rate of substitution?
The indifference curve analysis is based on the principle of marginal rate of substitution.
It is the rate at which an individual will exchange successive units of one commodity for another.
For example, if a consumer has more of apples than oranges, then he will be willing to give more of oranges for an extra unit of
apple.
It is the ratio between the marginal utilities of two commodities, which guides the consumer's choice.
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