MRS = (m₁/m₂) × (spice/sugar) - The trade-off ratio between resources
Interpretation: An agent with MRS = 1.00 is willing to trade 1 spice for 1 sugar. Trade occurs when two agents have different MRS values - one values sugar more (high MRS), the other values spice more (low MRS).
Price determination: When agents with MRS₁ and MRS₂ trade, the price is P = √(MRS₁ × MRS₂) (geometric mean), ensuring Pareto-improving exchanges.