Marginal Rate of Technical Substitution

The marginal rate of technical substitution (MRTS) tells how much capital is needed to replace a bit of labor. $$MRTS = - \frac{MP_L\left( K, L\right)}{MP_K \left( K, L \right)}$$

Example

The cookie factory's production function is `q \left( c, s \right) = K L^2`. The marginal rate of technical substitution is

$$ MRTS = - \frac{MP_L\left( K, L\right)}{MP_K \left( K, L \right)} = - \frac{2 K L}{L^2} = -\frac{2 K}{L} $$

Question

The production function is `q (K, L) = K^{63} L^{52}`.

Calculate the marginal rate of technical substitution in function of K and L.

The marginal product of labor is $$ MP_L = \frac{dq(K, L)}{dL} = 52 K^{63} L^{52 - 1} = 52 K^{63} L^{51} $$ The marginal product of capital is $$ MP_K = \frac{dq(K,L)}{dK} = 63 K^{63 - 1} L^{52} = 63 K^{62} L^{52} $$ Therefore, the marginal rate of technical substitution is $$ MRTS = - \frac{MP_L}{MP_K} = - \frac{52 K^63 L^{51}}{63 K^62 L^52} = - \frac{52 K}{63 L} $$