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Diminishing Marginal Rate of Substitution

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PPGPortal > Home > Concept Dictionary > D, E > Diminishing Marginal Rate of Substitution
 

Diminishing Marginal Rate of Substitution 

For strictly convex indifference curves, the slope of the indifference curve (MRS) decreases in absolute value as we increase one good.  

 

(Varian, Hal R. 2010. Intermediate Microeconomics: A Modern Approach, 8th ed. New York: W.W. Norton, p. 52.)

 

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This means the more you have of one good, the more you are willing to give it up in exchange for the other good.  Note however, that this does not hold for all convex curves.

     

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