Law of Diminishing Margine! Rate of Technical Substitution
An important feature of the marginal rate of technical substitution is worth nothing. Galleria rate of substitution X. for Y will generally diminish as the quantity 1’1′ X i_ increased relative to the quantity of Y. In other words, as the quantity of radol’ X is increased relative to the quantity of Y, the number of units of Y that will be required to be placed by 01 .’ unit of factor X will diminish, quantity of the output rv mainim; uncharged. This is known as the Rate of Technical which is only an extension of the Law of Diminishing Returns to the relationship between the productivity of two factors.
As the quantity of factor X is increased, and the quantity of factor Y is decreased, the marginal productivity of X will diminish and marginal productivity of Y with increase and. therefore, less and less of Y will he required to he rclp laccd hy one unit of X to maintain the same LEvel of output as more and more of X and less and less of Y is used.
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