Monday, August 16, 2010

From Preference To Marginal Rate Of Substitution

This is pretty much the standard textbook derivation of the MRS except that by viewing t size of a unit of X parametrically in Excel, it is easier to see the consequence of reducing the size a unit. There is simply hand waving about the limiting cases being the tangent to the indifference curve, but for this level of analysis the hand waving seems appropriate.