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Briefly explain and graphically illustrate the property of diminishing marginal rate of technical substitution and its relation to marginal productivities.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis

Section: Chapter Questions

Problem 8TY

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Question

Briefly explain and graphically illustrate the property of diminishing marginal rate of technical substitution and its relation to marginal productivities.

Definition Definition Rate at which one factor of production is decreased in order to maintain the same level of output when another factor of production is increased. MRTS allows for the substitution between factors of production: labor (L) and capital (K) in order to maintain a given level of output.

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