Which of the following formulas measures the rate of substitution for labour with capital?
A) - ∆L/∆K
B) - ∆K/∆L
C) ∆K/∆L
D) ∆L/∆K

Question

Quizplus · Accepted Answer

The rate of substitution for labor with capital, known as the marginal rate of technical substitution (MRTS), is given by -∆K/∆L, which represents the amount of capital that can be reduced for an additional unit of labor, keeping output constant.

Which of the Following Formulas Measures the Rate of Substitution