Opportunity cost vs MRS

[EngineIBer]

What’s the difference between opportunity cost and marginal rate of substitution?

Thanks!

[S2000magician]

Although they show up in different contexts (investment/business vs. consumption), they’re essentially the same thing: if you didn’t spend money (or time or whatever) on this, on how much of that would you spend it?

[bluebird.91]

They are similar but not the same. I think of it this way: opportunity cost is a general term which can be applied to any situation where you give up one thing by consuming/doing something else (NOT necessarily of equal value). MRS, used in context of consumption, is a specific quantitative measure which equalizes the benefit of the consumption of 2 different goods at any given level.

The key difference is that MRS is necessarily a representation of equality whereas opportunity cost is not.

[S2000magician]

@bluebird.91

They are similar but not the same. I think of it this way: opportunity cost is a general term which can be applied to any situation where you give up one thing by consuming/doing something else (NOT necessarily of equal value). MRS, used in context of consumption, is a specific quantitative measure which equalizes the benefit of the consumption of 2 different goods at any given level.

The key difference is that MRS is necessarily a representation of equality whereas opportunity cost is not.

Well stated.