Show the behavior of the marginal Rate of substitution

Perfect substitute’s indifference curves are characterized by the fact that the MRS is constant at –1. The neutral case is characterized by the fact that the MRS is everywhere infinite .The preference for perfect complements are characterized by the fact that the MRS is either) or infinite and nothing is between.


The assumption of monotonicity implies that ICs must have a negative slope, so the MRS always involves reducing the consumption of one good in order to get mote of another for monotonic preferences.
The case of convex ICs exhibits yet another kind of behavoiur for the MRS. For Convex ICs, the MRS decreases as more of X₁ is consumer. Thus the IC exhibits a diminishing Mrs. Convexity of ICs implies that the more of a good consumed, the more willing is a consumer is to give some of it u- in exchange for the other goods. This seems very natural for a consumer and hence convexity if ICs becomes both necessary and sufficient conditions for consumer equilibrium besides just having a point of tangency between the consumer’s budget line and the IC.

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Wilfykil answered the question on March 20, 2019 at 07:09