Marginal Rate of Technical Substitution
Marginal rate of technical substitution is a concept similar to the marginal rate of substitution in the theory of demand. Iarginal ratc of technical substitution of X for Y is the number of units of factor which can he replaced hy one unit if factor X. quantity of the output winning uncharged. The concept of marginal rate of technical substitution can be easily ‘understood from the table given above. We reproduce below the same table to find out the marginal rate of technical substitution.
As mentioned earlier. in this table various combinations of factors X and Y yield output equal to 40 units of the product. From the comparison of combinations A and B. it will become clear that here 4 units of factor Y can be replaced by I unit of factor X without any change in output. Therefore.