What Is a Marginal Rate of Technical Substitution?

The marginal technological substitution rate refers to the ratio of increasing the number of one factor of production to the number of another factor that can be reduced under the premise that the output remains unchanged. Generally, because the production factors input in the production process are not completely replaced, as the number of one production factor increases, the marginal technological substitution rate of the factor to another factor decreases.

Marginal Technology Substitution Rate

Marginal Rate of Technical Substitution (MRTS)

The reason why the marginal technology substitution rate is decreasing is because

In a geometric sense, in a

On the premise of maintaining the same level of output, when the input of a production factor continues to increase, the quantity per unit decreases.

Because the marginal technology substitution rate is generally decreasing, the absolute value of the slope of the iso-yield curve is also diminishing, so the iso-yield curve is usually convex toward the origin.