<Dl> <Dd> <Ul> <Li> The marginal rate of substitution tells how much ' y ' a person is willing to sacrifice to get one more unit of ' x ' . </Li> <Li> This assumption assures that indifference curves are smooth and convex to the origin . </Li> <Li> This assumption also set the stage for using techniques of constrained optimization because the shape of the curve assures that the first derivative is negative and the second is positive . </Li> <Li> Another name for this assumption is the substitution assumption . It is the most critical assumption of consumer theory : Consumers are willing to give up or trade - off some of one good to get more of another . The fundamental assertion is that there is a maximum amount that `` a consumer will give up , of one commodity , to get one unit of another good , in that amount which will leave the consumer indifferent between the new and old situations '' The negative slope of the indifference curves represents the willingness of the consumer to make a trade off . </Li> </Ul> </Dd> </Dl>
<Dl> <Dd> <Ul> <Li> The marginal rate of substitution tells how much ' y ' a person is willing to sacrifice to get one more unit of ' x ' . </Li> <Li> This assumption assures that indifference curves are smooth and convex to the origin . </Li> <Li> This assumption also set the stage for using techniques of constrained optimization because the shape of the curve assures that the first derivative is negative and the second is positive . </Li> <Li> Another name for this assumption is the substitution assumption . It is the most critical assumption of consumer theory : Consumers are willing to give up or trade - off some of one good to get more of another . The fundamental assertion is that there is a maximum amount that `` a consumer will give up , of one commodity , to get one unit of another good , in that amount which will leave the consumer indifferent between the new and old situations '' The negative slope of the indifference curves represents the willingness of the consumer to make a trade off . </Li> </Ul> </Dd> </Dl>
the rate of substitution along the indifference curve implies
the rate of substitution along the indifference curve implies
how much ' y ' a person is willing to sacrifice to get one more unit of ' x '
how much ' y ' a person is willing to sacrifice to get one more unit of ' x '