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Alice has perfect substitutes preferences. She is indifferent between bundle (x = 20, y = 0) and bundle (x= 0, y = 30). What is her marginal rate of substitution for x with y?

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The marginal rate of substitution will be 0.66

What is the marginal rate of substitution?

Marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. The marginal rate of substitution for goods x for goods y is:

Price of goods (x) divided by the price of goods(y). That is,

MRSxy = (Px / Py)

MRSxy = 20  /  30

MRSxy  =   0.66

Therefore the marginal rate of substitution will be 0.66

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