Economics Marginal Utility Questions
The concept of diminishing marginal rate of substitution refers to the idea that as a consumer substitutes one good for another, the amount of satisfaction or utility gained from each additional unit of the good being substituted decreases. In other words, as a consumer consumes more of one good and less of another, the consumer is willing to give up fewer units of the good they have more of in order to obtain an additional unit of the good they have less of. This occurs because individuals tend to allocate their resources in a way that maximizes their overall satisfaction or utility, and as they consume more of a particular good, the marginal benefit or satisfaction derived from each additional unit decreases.