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Comparing Marginal Rates of Substitution
An individual's preferences for daily free time (t) and consumption (c) can be represented by a utility function where the marginal rate of substitution (MRS) of free time for consumption is given by the ratio c/t. Consider two points on one of this individual's indifference curves: Point X (10 hours of free time, 400 units of consumption) and Point Y (20 hours of free time, 200 units of consumption). Calculate the MRS at both Point X and Point Y. Then, provide an economic explanation for why the MRS is different at these two points, relating your answer to the individual's willingness to trade consumption for free time.
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