Create a diagram with axes representing the quantities of XA and XB. Plot the original and new budget constraints, mark the original and new optimal consumption bundles, and show the movement along the indifference curve for the substitution effect. Use arrows and labels to clearly depict these effects.
Marginal Rate of Technical Substitution
MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.
Preferences and Utility Analysis
Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.
Create a diagram with axes representing the quantities of XA and XB. Plot the original and new budget constraints, mark the original and new optimal consumption bundles, and show the movement along the indifference curve for the substitution effect. Use arrows and labels to clearly depict these effects.
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