Table of Contents
What happens when MRTS zero?
The first one has a MRTS that changes along the curve, and will tend to zero when diminishing the quantity of L and to infinite when diminishing the quantity of K. For perfect substitutes, the MRTS will remain constant.
What is the marginal rate of technical substitution How does it relate to the isoquant curve?
Marginal rate of technical substitution (MRTS) is the rate at which a firm can substitute capital with labor. It equals the change in capital to change in labor which in turn equals the ratio of marginal product of labor to marginal product of capital. MRTS equals the slope of an isoquant.
Why does marginal rate of technical substitution between factor diminish?
The marginal rate of technical substitution diminishes when the producer keeps on substituting one resource of production with another input of production.
Why is marginal rate of substitution diminished?
Most indifference curves are usually convex because as you consume more of one good you will consume less of the other. So, MRS will decrease as one moves down the indifference curve. This is known as the law of diminishing marginal rate of substitution.
Why does marginal rate of technical substitution diminishes?
What is isoquant explain graphically?
An isoquant curve is a concave line plotted on a graph, showing all of the various combinations of two inputs that result in the same amount of output. Most typically, an isoquant shows combinations of capital and labor and the technological trade-off between the two.
Why does marginal rate of technical substitution of Labour for capital diminish as more Labour is used by substituting capital?
The isoquant AH reveals that as the units of labour are successively increased into the factor-combination to produce 100 units of good X, the reduction in the units of capital becomes smaller and smaller. Thus, the marginal rate of technical substitution diminishes as labour is substituted for capital.