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Production possibility frontier - The marginal rate of transformation | | Production possibility frontier - The marginal rate of transformation: Encyclopedia II - Production possibility frontier - The marginal rate of transformation | | The slope of the production possibilities curve at any given point is called the marginal rate of transformation. It describes numerically the rate at which one good can be transformed into the other. It is also called the “marginal opportunity cost” of a commodity, that is, it is the opportunity cost of X in terms of Y at the margin.
If, for example, the (absolute) slope at point "BB" in the diagram is equal to 2, then, in order to produce one more computer, 2 units of food production must be sacrifice ...
See also:Production possibility frontier, Production possibility frontier - The marginal rate of transformation | | | Production possibility frontier, Production possibility frontier - The marginal rate of transformation, production, costs, and pricing, production theory basics, production function | | |
| | | Production possibility frontier: Encyclopedia II - Production possibility frontier - The marginal rate of transformation
Production possibility frontier - The marginal rate of transformation
The slope of the production possibilities curve at any given point is called the marginal rate of transformation. It describes numerically the rate at which one good can be transformed into the other. It is also called the “marginal opportunity cost” of a commodity, that is, it is the opportunity cost of X in terms of Y at the margin.
If, for example, the (absolute) slope at point "BB" in the diagram is equal to 2, then, in order to produce one more computer, 2 units of food production must be sacrificed. If at "AA" for example, the marginal opportunity cost of computers in terms of food is equal to 0.25, then, the sacrifice of one unit of food could produce 4 computers.
The marginal rate of transformation can be expressed in terms of either commodity. The marginal opportunity costs of computers in terms of food is simply the reciprocal of the marginal opportunity cost of food in terms of computers.
Other related archivesEconomics of production, Edgeworth box, Microeconomics, Nash equilibrium, Production and manufacturing, allocative efficiency, diminishing marginal returns, economics, efficiency, factor endowments, factors of production, frontier, graph, inefficiency, inefficiently, line, macroeconomics, management skills, marginal costs, microeconomics, neoclassical economics, opportunity cost, potential output, production function, production functions, production theory basics, production, costs, and pricing, technology, trade-off
 Adapted from the Wikipedia article "The marginal rate of transformation", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki |
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