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Feb 24

# Perfect Substitute Utility Function U (x,y)=ax+by,Now what is MRS derived from this equation?

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Anonymous
Jul 4

The Marginal Rate of Substitution (MRS) represents the rate at which a consumer is willing to trade one good for another while maintaining the same level of utility. In the case of the utility function U(x, y) = ax + by, where a and b are constants representing the respective marginal utilities of x and y, the MRS can be derived as follows:

MRS = - (MUx / MUy)

To find the marginal utilities, we need to take the partial derivatives of the utility function with respect to x and y.

Taking the partial derivative with respect to x:

MUx = ∂U/∂x = a

Taking the partial derivative with respect to y:

MUy = ∂U/∂y = b

Substituting the marginal utilities into the MRS equation, we get:

MRS = - (a / b)

So, the Marginal Rate of Substitution (MRS) derived from the utility function U(x, y) = ax + by is - (a / b).

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