Marginal Rate Of Transformation

The rate at which one good must be sacrificed in order to produce a single extra unit (or marginal unit) of another good, assuming that both goods require the same scarce inputs. The marginal rate of substitution is tied to the production possibilities frontier (PPF), which displays the output potential for two goods using the same resources. To produce more of one good means producing less of the other because the resources are efficiently allocated.

The marginal rate of transformation is the absolute value of the slope of the production possibilities frontier. For each point on the frontier (which is displayed as a curved line), there is a different marginal rate of substitution, based on the economics of producing each product individually.

The marginal rate of transformation allows economists to analyze the opportunity costs to produce one extra unit of something; in this case the opportunity cost is represented in the lost production of another specific good. Generally speaking, the opportunity cost rises (as does the absolute value of the marginal rate of transformation) as one moves along (down) the PPF; as more of one good is produced, the opportunity cost (in units) of the other good increases.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Marginal concepts — In economics, marginal concepts are associated with a specific change in the quantity used of a good or service, as opposed to some notion of the over all significance of that class of good or service, or of some total quantity thereof.… …   Wikipedia

  • Marginal utility — In economics, the marginal utility of a good or service is the utility gained (or lost) from an increase (or decrease) in the consumption of that good or service. Economists sometimes speak of a law of diminishing marginal utility, meaning that… …   Wikipedia

  • Transformation problem — In 20th century discussions of Karl Marx s economics the transformation problem is the problem of finding a general rule to transform the values of commodities (based on labour according to his labour theory of value) into the competitive prices… …   Wikipedia

  • Tendency of the rate of profit to fall — The tendency of the rate of profit to fall (TRPF) is a hypothesis in economics and political economy, most famously expounded by Karl Marx in chapter 13 of Das Kapital Vol. 3. It was generally accepted in the 19th century. Economists as diverse… …   Wikipedia

  • Предельная норма трансформации — MARGINAL RATE OF TRANSFORMATION Соотношение предельных издержек производства двух продуктов, определяемое наклоном кривой трансформации (см. Production possibility boundary), которая показывает возможность замещения производства одного продукта… …   Словарь-справочник по экономике

  • Production–possibility frontier — In economics, a production–possibility frontier (PPF), sometimes called a production–possibility curve or product transformation curve, is a graph that compares the production rates of two commodities that use the same fixed total of the factors… …   Wikipedia

  • Welfare economics — Economics …   Wikipedia

  • Production-possibility frontier — In economics, a production possibility frontier (PPF) or “transformation curve” is a graph that shows the different rates of production of two goods that an economy (or agent) could efficiently produce with limited productive resources. Points… …   Wikipedia

  • П — Пааше индекс [Paasche price index] Пагамент (Payment in cash) Пай (share, stock, stake) Пакет акций (interest, stock ) Пакетный множитель (blockage factor) …   Экономико-математический словарь

  • Public good — For the egalitarian terms, see Common good and Public interest. In economics, a public good is a good that is nonrival and non excludable. Non rivalry means that consumption of the good by one individual does not reduce availability of the good… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.