Marginal Rate Of Transformation

To buy this...or that...or maybe nothing, and invest instead (your retired future self will thank you).

Economics reminds us that life is full of tradeoffs, for both consumers and producers. The marginal rate of transformation (MRT) focuses on supply for firms.

The marginal rate of transformation is how much of one good must be given up in order to create another good...yep, the opportunity cost of getting the latter good. If that conjures up pastures of production possibilities curves (PPCs), then good for you and your noggin. Every point on the PPC has a different marginal rate of transformation (assuming the PPC is that typical bowed-out shape, and not linear).

The MRT, like the PPC, helps firms determine how their inputs are being allocated to create the outputs.