ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Concept explainers

Marginal Rate of Technical Substitution
MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.
Preferences and Utility Analysis
Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.
Question

Suppose you are choosing between hours of work (a bad measured on the horizontal axis) and money (a good measured on the vertical axis).

a. Explain the meaning of MRS in words.

b. Should your MRS be positive or negative in this case?

c. Is your MRS increasing, constant or decreasing as you increase the hours of work along an indifference curve? Explain and draw some indifference curves for this example.

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