Question: Suppose we calculate the MRS at a particular bundle for a consumer whose utility function is U(q1, q2). If we use a positive monotonic transformation,
Suppose we calculate the MRS at a particular bundle for a consumer whose utility function is U(q1, q2). If we use a positive monotonic transformation, F, to obtain a new utility function, V(q1, q2) = F(U(q1, q2)), then this new utility function contains the same information about the consumer's rankings of bundles. Prove that the MRS is the same as with the original utility function?
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The marginal rate of substitution MRS is the slope at a point on an indifference curve ... View full answer
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