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^{51} L^{63}`.

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

The marginal product of labor is $$ MP_L = \frac{dq(K, L)}{dL} = 63 K^{51} L^{63 - 1} = 63 K^{51} L^{62} $$ The marginal product of capital is $$ MP_K = \frac{dq(K,L)}{dK} = 51 K^{51 - 1} L^{63} = 51 K^{50} L^{63} $$ Therefore, the marginal rate of technical substitution is $$ MRTS = - \frac{MP_L}{MP_K} = - \frac{63 K^51 L^{62}}{51 K^50 L^63} = - \frac{63 K}{51 L} $$