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Diminishing Technical Rate of Substitution

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PPGPortal > Home > Concept Dictionary > D, E > Diminishing Technical Rate of Substitution
 

Diminishing Technical Rate of Substitution 

This principle states that in a two good model, if we increase the amount of factor A and adjust factor B so as to stay at the same level of production, the technical rate of substitution will decline.

(Dwayne Benjamin, Toronto PPG 1002H)

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It is the principle of diminishing technical rate of substitution that causes isoquants to have the same sort of convex shape that indifference curves usually have.

 

 

 

References

 

Definition prepared by students at the University of Toronto School of Public Policy and Governance and edited by Ben Eisen.

     

Important Notices
© University of Toronto 2008
School of Public Policy and Governance