marginal rate of technical substitution

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marginal rate of technical substitution

the ratio of the MARGINAL PHYSICAL PRODUCTS of two FACTOR INPUTS in the production process, that is, the amount by which it is possible to reduce factor input X and maintain output by substituting an extra unit of factor input Y. It is measured by the slope of the producer's ISOQUANT CURVE. In order to minimize his production costs, a producer must equate the ratio of the marginal physical products of the two factor inputs (shown by the isoquant curve) to the ratio of their factor prices (shown by the ISOCOST LINE). See ISOQUANT MAP.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
The utility function of an individual under coercion from the full social income maximizes when the rate of technical substitution in consumption (the slope of the curve of indifference of the maximizer individual, denoted Ui) is equal to the technical rate of substitution in production (slope of the curve of production possibilities, denoted CPP, of the maximizer individual), i.e.
Technical rate of substitution in consumption between X and R, reflected by the shape or the slope of indifference curves, provides additional information about an individual's preference for one good or another.
This assumption maintains that the technical rate of substitution between inputs (say, capital and labor) is constant at each combination of labor and capital.

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