variable factor proportions

variable factor proportions
The ease with which one factor input can be substituted for another. Where factor proportions are variable, the elasticity of technical substitution between inputs is high: a small change in relative factor prices causes a cost-minimizing firm to shift its use of factors strongly towards whichever has become relatively cheaper. If factor proportions are not easily variable, the elasticity of technical substitution is low, and firms change their relative use of factors very little as relative factor prices change.