Questions

The marginal rate of substitution (MRS) is a concept from microeconomics that refers to the rate at which a consumer is willing to substitute one good (X) for another good (Y) while maintaining the same level of utility or satisfaction. In other words, it is the amount of good Y that a consumer is willing to give up to obtain an additional unit of good X, without changing their overall happiness.

The MRS is typically illustrated on an indifference curve, which represents combinations of two goods that give a consumer equal satisfaction. The slope of the indifference curve at any point is the MRS.

Now, regarding why the MRS of X for Y falls as the quantity of X is increased: this is due to the law of diminishing marginal utility. As a consumer gets more of good X, the additional satisfaction (marginal utility) gained from each additional unit of X decreases. Consequently, the consumer is willing to give up less of good Y to obtain more of good X because each additional unit of X is less valuable to them in terms of utility. This causes the MRS to diminish as you move down along the indifference curve.

This concept reflects typical consumer behavior, where variety is preferred, and having more of a single good makes each additional unit less desirable, prompting a decreased willingness to trade other goods for it.