Marginal rate of technical substitution

MRTS

The elaboration of MRTS is Marginal rate of technical substitution. MRTS can be defined as at what rate one factor of production can be substituted by another factor of production.

MRTS can be explained by the following schedule:

Factor Combination	Factor (y)	Factor (X)	MRTS
A B C D E	12 8 5 3 2	1 2 3 4 5	- 4:1 3:1 2:1 1:1

Graphical presentation: -

Fig: MRTS is given by the slope of the ISO –QUANT

Each of the input combinations A, B, C, D and E gives the same level of output. From combination A to combination B units of Y are replaced by 1 unit of X in the production
process without any change in the level of output. Therefore the MRTS is 4:1 atthis stage. Again from combination B to combination C 3 units of Y are replaced by 1 unit of X. Thus the marginal rate of technical substitution is now 3;1. Likewise, marginal rate of technical substitution between factor combination C and D is 2:1 and between factor combination D and E is 1:1.

The marginal rate of technical substitution at a point on the equal product curve can be known fromthe slope of the equal product curve at that point.

MRTS = Slope = Change in factor y/ change in factor x

= 4y/4x