In this section Hicks examines the foundation for the principle of Diminishing Marginal Rate of Substitution. He reviews the fact that his goal is to deduce laws that deal with the reaction of a consumer to market conditions. In particular, when conditions change, we expect the consumer to move from one position of equilibrium to another. The principle of Diminishing Marginal Rate of Substitution must hold at the new position, or else it would not constitute an equilibrium. Moreover, as Hicks argues, if there were some intermediate point between the two positions of equilibrium where the principle did not hold (and hence there were a "kink" in the indifference curve), then "there will be some systems of prices at which the consumer will be unable to choose between two different ways of spending his income." The principle of Diminishing Marginal Rate of Substitution is a simple assumption that rules out these kinds of difficulties, and it is consistent with our experience as well.
After some discussion, Hicks argues that "other principles can be discovered whose foundation is exactly similar." He describes how some of these principles will be worked out in later chapters, and he concludes this section with the statement that, "We are in sight of a unifying principle for the whole of economics."
