As an example, if baking one less cake frees up enough resources to bake three more loaves of bread, the rate of transformation is 3 to 1 at the margin. Or consider that it costs $3 to make a cake. Meanwhile, $1 can be saved by not making a loaf of bread. Thus, the MRT is 3, or $3 divided by $1.
What is marginal rate of transformation?
The marginal rate of transformation is the number of units of one product that can be increased by reducing the quantity of another product. It is also considered as the opportunity cost for generating an extra unit of output.
What is the other name of marginal rate of transformation?
Marginal rate of transformation (or marginal opportunity cost) is the ratio between loss of output of Good - Y gain of output of Good - X when some resources are shifted from Good - Y to Good - X.
What is MRT in economics?
marginal rate of transformation (MRT) The quantity of some good that must be sacrificed to acquire one additional unit of another good. At any point, it is the slope of the feasible frontier. See also: marginal rate of substitution. The negative slope tells us that the grade decreases as free time increases.