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What is marginal rate of substitution (MRS) and at what point equilibrium at tangency occurs?

What is marginal rate of substitution (MRS) and at what point equilibrium at tangency occurs?

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Marginal rate of substitution (MRS) is an economics term that refers to the amount of one good that is substitutable for another. The slope of an indifference curve at a particular point is known as the marginal rate of substitution. It measures the rate at which the consumer is willing to substitute one commodity for another.

At the equilibrium that is at the point of tangency : MRS equals to the price ratio.

MRS = (Change in x/ Change in y)= (MUx/MUy) = Px/Py.

This represents the utility maximizing point.

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