6.12 : معدل الاستبدال الفني الهامشي -الجزء الثاني

The Marginal rate of technical substitution helps firms decide on substituting the inputs without affecting output.

Consider a factory that makes toothbrushes using labor and machines.

If, at a point, the marginal product of labor is two and the marginal product of capital is one, the MRTS of labor for capital will be negative two.

This means that for each additional unit of capital used, two fewer units of labor are needed to produce the same output.

Suppose one unit of the machine is not working. If the repair takes too long, then the factory can maintain the same level of production by adding two units of labor. This will help the factory retain the same level of production despite the malfunctioning machine.

Here, the MRTS helps the factory determine the rate at which it can substitute inputs.

However, it assumes that technology or production techniques remain constant. In reality, technological advancements can change the ratio of capital to labor needed to maintain the same level of output.