Tag Archives | Elasticity of Substitution

In this article we will discuss about the elasticity of substitution in a firm. Let us suppose that the firm's production function is Q = f(L, K)                                   [(8.122)] The convexity property of the isoquants (IQs) expresses the principle of diminishing marginal rate of technical substitution (MRTS) of L for K as the substitution of L for K proceeds. The MRTS [...]