Marginal Rate of Substitution

The MRS: nope, not the cool sports car, and not the missus.

In economics, MRS refers to the marginal rate of substitution. As the name implies, the MRS is the rate at which someone will give up x-amount of one good in exchange for another good...as long as the same utility is maintained.

This is the basis for indifference curves in economics...which you will definitely see in an intermediate micro econ course. Indifference curves plot one good on the x-axis and another good on the y-axis, with a negatively-sloped, curved curve on it. This graph shows the tradeoffs between the two goods, i.e. the amount of one good you’d give up for the other.

For instance, if you’re at the movies and you get popcorn while your friend gets candy, and y’all decide to do a little trade because you’re just that cute, the amount of popcorn you’re willing to give up in exchange for some candy will be a certain amount. You might be willing to give up two handfuls of popcorn for three Whoppers, or two Sour Patch Kids.