Why does the marginal rate of technical substitution (MRTS) decline as

Question

Why does the marginal rate of technical substitution (MRTS) decline as we move rightward and downward along a convex-shaped isoquant?

23 Dec 2024

Answer :

Word Count : 300

The Marginal Rate of Technical Substitution (MRTS) represents the rate at which one input can be substituted for another, while keeping output constant. It is calculated as the ratio of the marginal products of the two inputs involved. As we move rightward and downward along a convex-shaped isoquant, the MRTS declines due to the principle of diminishing marginal returns.

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