Write a buyget line equation of a consumer if the two goods purchased by the consumer. Good X and Good Y are priced at 10 and Rs 5 respectively and the conumer's income is Rs 100 OR Define marginal rate of substitution. Explain its behaviour along an indifference curve.

Write a buyget line equation of a consumer if the two goods purchased

1.	Write a buyget line equation of a consumer if the two goods purchased by the consumer. Good X and Good Y are priced at 10 and Rs 5 respectively and the conumer's income is Rs 100 OR Define marginal rate of substitution. Explain its behaviour along an indifference curve.
Answer» Solution :Budget Line equation: `m = P_(x) Q_(x) + P_(y) Q_(y)`, where m= income Accordingly: `100 = 10Q_(x) + 5Q_(y)` OR MRS refers to therate at which the commodities can be substituted with each other, so that total SATISFACTION of the consumer remains the same. Marginal Rate of SUBSTITUTION diminishes as the consumer moves dowmward along the same indifference curve. It SHOWS that consumer is willing to sacrifice lesser units of a Good Y, in order to gain one ADDITIONAL unit of Good X. This happens due to the operation of law of DIMINISHING marginal utility.