NTA-NET (UGC-NET) Economics & Development (01) Micro-Economic Analysis-Theory of Production and Costs Study Material (Page 4 of 8)

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Marginal Rate of Technical Substitution

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  • It is tells us the rate at which factors can be substituted at the margin without altering the level of output.
The Slope of Isoquant
  • MRTS tells the slope of Isoquant.

  • It is important to note that MRTS is that it is equal to the ratio of marginal product of 2 factors.

Marginal Product of Factors

Marginal product of labour

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Short Run Analysis of Production

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Law of valuable proportions

  • It is also called as the law of diminishing return this law can be divided into 3 stages of production.
Law of Valuable Proportions
  • Stage 1:-In this stage, total product increase at an increasing rate. The point ‘A’ where the total product stops increasing at an increasing rate and starts increasing at a diminishing rate is called the point of inflexion.
  • Stage 2: In stage 1 ends when AP reaches its minimum point. During this stage, TP increase but at a diminishing rate. It reaches its highest point at ‘B’ .

    During this stage both AP and MP are falling at the end of this stage MP is zero.

    This stage is important because this is the stage where firms would be to operate.

  • Stage 3: In this stage T…

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