Talk:Marginal rate of substitution

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shouldn't credits be removed?


So how does MRS relate to relative price of goods ? are they the same ?

  • No, MRS is unrelated to prices. Instead, it's a matter of utility (as expressed by consumer preferences). It's how much of one good you would be willing to give up for another good, if price weren't an issue. So, if you had some X and some Y, and you could barter Y for X, then the MRS of X for Y would be how much Y you would be willing to give up for 1 unit of X. --LostLeviathan 04:26, 16 January 2006 (UTC)
    • Note that while the definition of MRS and relative price are completly different the two quantities will still be related in a competitive market.

[edit] More MRS's

I was wondering if anyone new about a .mrs file, a encrypted compression file. Kind of like a .rar file.


[edit] QUESTION

If MRS rises of good x for good y, what effect does this have on real wage, employment and output? and can this explain business cycles?

[edit] Remarks on Mathematical Operations

This article completely ignore that the mathematical operations involved might be forbidden. An utility function, as well as a production function might be "non-smooth" (for example non-differentiable, even non-continuous). In this case, what does the formulas become? What would be the economic interpretation of such situations? For example,

U(x)=(u1 for x<=x1 and u2 for x>x1)

shows that at x1 we have a point of discontinuity

Also, for a production function of the type

F(x,y)=min{x/a,y/b}

we have non-differentiability points (for example the point (a,b))

So, in these situations, what becomes notions like MRS, TRS and elasticity of substitution?

The functions usually used to describe the production processes are inherited from econometrics, not from accurate modelling of the production process; the economic definition suggests that the production function is the result of an optimisation process... so, an intrinsic non-smooth character.

Cristiann 23:17, 4 November 2006 (UTC)

Not only might the utility function not be smooth, it might not correspond to a measure at all. A pervasive problem with economics articles on Wikipedia is that the are written by editors who are only familiar with works in the Bentham-Jevons-Marshall tradition. But see “The Austrian Theory of the Marginal Use and of Ordinal Marginal Utility” by J. Huston McCulloch in Zeitschrift für Nationalökonomie 37 (1973) for a mathematically formal treatment of MRS where utility cannot be fit to any measure. —SlamDiego 06:23, 24 April 2007 (UTC)