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in Consumers Equilibrium by (63.7k points)

Why should the MRS be low?

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Let’s think the consumer has two commodities : Good-1 and Good-2, if the consumer has more of Good-1, his intensity of desire to have it reduces. On the other hand, as he is having minimum and less of Good-2, his intensity of desire to have it tends to rise. Accordingly, for every additional unit of Good-1, a consumer is willing to give up less and less amount of Good-2. Given figure illustrates this point clearly.

In figure, AB = BC. For the sake of simplicity, AB = GE. To have additional GE, the consumer is willing to give up QG. Subsequently, to have additional HF = GE, the consumer is willing to give up only EH. Apparntly EH < QG. Implying that .as we move along on IC (which is convex to the origin), we find that a consumer is willing to give up less and less amount of Good-2 for a unit more of Good-1. Implying that MRS tends to diminish.

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