Given that the two factor of production behave as a perfect substitute to one another in the production process what will be the shape of corresponding isoqant and the value of MRTS as we move down along the isoquant?
Answers
If the two factors of production in the production process are perfect substitutes of each other,the shape of isoquant would be a downward sloping straight line and the value of Marginal Rate of Technical Substitution(MRTS) would be constant.
Explanation:
A perfect substitution between the two factors of production implies that the rate at which they are utilized or employed in the production process is constant.It indicates that without a certain proportion of one input,the other input cannot function productively or efficiently.In simple terms,it denotes that without some amount of support from one input,the other one cannot operate productively or one input cannot be increasingly sacrificed to utilize the other in the production process.Hence,both the inputs have to be utilized at a constant proportion.Therefore,the slope of the isoquant or the value of MRTS remains constant in this particular instance and the shape of the isoquant would be straight due to perfect factor substitution.