Answer to Question #287530 in Microeconomics for pokdi

Question

Explain the causes of the marginal rate of substitution (MRS) if good is perfect substitutes and perfect complements.

Answer 1

The marginal rate of substitution is the rate at which a consumer of a particular product is willing to replace one good with another while still maintaining the same level of utility. ... The primary factors that cause a change in the marginal rate of substitution are price and quantity owned of a good or service.

In economics the marginal rate of substitution beween two complementary goods is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility.

For these reason at equilibrium consumption levels assuming there is no externalities, marginal rates of substitution are identical.