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Marginal Rate of Technical Substitution


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.


Note


Example