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  5. Diminishing Marginal Rate of Substitution

Diminishing Marginal Rate of Substitution

Definition of 'Diminishing Marginal Rate of Substitution'

Consumer tastes exhibit a Diminishing Marginal Rate of Substitution when, to hold utility constant, diminishing quantities of one good must be sacrificed to obtain successive equal increases in the quantity of the other good.

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Related Terms

Marginal Rate of SubstitutionThe Law of Diminishing ReturnsSubstitution EffectDiminishing Marginal UtilityDistortionMarginal FirmMarginal UtilityMCCMEIGeneral InflationFlat RateFloating Rate NoteForward PointsHurdle RateMarginal CostMarginal Cost of CapitalMarginal Efficiency of InvestmentMarginal Product of LabourMarginal Propensity to ImportMarginal Propensity to Save

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