Question

If the marginal utility of X is 6 and the marginal utility of Y is 2, what that the marginal rate of substitution?

Answer 1

Marginal utility (MU) is the utility gained from consuming one more unit of a good/service. On the other hand, the marginal rate of substitution (MRS) is the amount of a good/service that a consumer is willing to give up in order to gain one more unit of another good.

The marginal rate of substitution between two goods X and Y is given by:

MRS_XY = MU_X/MU_Y

Here, we are given that,

MU_X = 6

MU_Y = 2

So, MRS_XY = MU_X/MU_Y

MRS_XY = 6/2

MRS_XY = 3

Thus, the marginal rate of substitution between X and y is 3. This means that the consumer is willing to give up 3 units of good Y to gain 1 unit of good X.