What is marginal rate of transformation? Explain with the help of an example.
Mrt is the ratio of number of units sacrifice to gain an additional units of one another commodity. Example of mrt is 20units of guns and1 units of butter (I. e.20G+1B) can be produce by utilizing the resources fully and efficiently. If the economy decides to produce 2B, then it has to cut down production of guns by 2units. In the given case, 2G is the opportunity cost of producing1B, ie met is2g:1b.
Mrt is the rate at which the unit of one goods have to be sacrificed to produce one more unit of the Other goods in a two good economy. For example: suppose an economy produces only two goods X and Y. Further suppose that by employing this resource fully and efficiently,the economy produce 1X + 10Y. If the economy decides to produce 2X, it has to cut down production of y by two unit then do I is the opportunity cost of producing 1X then to X ratio 1 X is the MRT