Production Analysis >> Marginal rate of technical substitution b/w Labor and Capital


The marginal rate of technical substitution (MRTS) is the rate at which one aspect must be decreased so that the same level of productivity can be maintained when another factor is increased. The MRTS reveals the give-and-take between factors, such as capital and labor, that firms make out of the necessity to maintain a constant output.
(MRTS = MPl/MPk).

Marginal rate of technical substitution b/w Labor and Capital