This video explains how to calculate and use the marginal rate of technical substitution. We start by learning how to calculate it, then move on to use it in order to properly draw isoquant curves and, finally, we analyse the marginal rate of technical substitution for different kinds of isoquants.
The marginal rate of technical substitution can be defined as, keeping constant the total output, how much input 1 have to decrease if input 2 increases by one extra unit. In other words, it shows the relation between inputs, and the trade-offs amongst them, without changing the level of total output. It is also worth mentioning that the marginal rate of technical substitution is equal to the slope of isoquants.
The marginal rate of technical substitution should not be confused with the marginal rate of substitution or the marginal rate of transformation.
Learn more by reading the dictionary entry.