Definition
Holding output level
fixed, we can define the marginal rate of technical substitution (MRTS) of input l for input k at
as:
Here
is production function.
Interpretation
measures the additional amount of input k that must be used to keep output at level
when the amount of input l is decreased marginally.
It is the production theory analog to the consumer's marginal rate of substitution: the trade-off between inputs that keeps the amount of output constant.
MRTS is the special case of MRT if there are two inputs.