The marginal rate of substitution is a relative concept that measures the utility of a good with reference to other goods. It is the rate at which an individual must give up Good A in order to obtain one more unit of Good B, while keeping his or her overall utility (satisfaction) constant.

For example, consider a specific individual’s indifference curve between waffles and pancakes. If the marginal rate of substitution of waffles for pancakes is 2, then the individual would be willing to give up 2 waffles in order to obtain 1 extra pancake. You can also think of the marginal rate of substitution as a way of mathematically expressing the opportunity cost for one more unit of something; in this case the opportunity cost of getting one more pancake is giving up two waffles.