Economics, 3rd Edition

The Marginal Rate of Substitution

The slope of an indifference curve is not constant throughout 

its length but changes at every point. The marginal rate 

of substitution measures that rate at which a consumer is 

prepared to substitute one good for another. In this example, 

to acquire an additional 7 units of cola the consumer is 

willing to give up 10  units of pizza.

Th M

i

l R t

FIGURE 5.9

Quantity

of cola

Quantity

of pizza

A

20

12

5

5

10

20

B

C

I

1

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112  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

that the consumer would be willing to give up relatively large amounts of pizza to acquire some additional  

cola. However, moving from point B to point C is a slightly different matter. The situation is almost reversed – to  

gain additional litres of cola the consumer is willing to sacrifice fewer pizzas.

The rate at which consumers are willing to substitute one good for another is called the marginal rate of 

substitution. The slope at any point on an indifference curve equals the rate at which the consumer is will-

ing to substitute one good for the other. The