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Baranidhara
n
Present by
Engineering
Economics &
Financial
Accountingment
Ee&fa
September 8, 2015
ISOQUANT
meaning -
Equal
-Quant as in quantity
Isoquant a line of equal quantity
ISOQUANTS
An isoquant curve shows various
combinations of two input factors such as
capital and labour , which yield the same
level of output.
An isoquant curve represent all such
combinations which yield equal quantity of
the output and any or every combination is
a good combination of the manufacture.
Since he prefers all these combination
equally, an isoquant curve is also called
product indifference curve
40
Units
of K
40
20
10
6
4
35
30
25
Units
of L
5
12
20
30
50
Point on
diagram
a
b
c
d
e
20
15
10
5
0
0
10
15
20
25
30
35
40
45
50
An
isoquant yielding output (TPP) of 5000 units
45
a
40
Units
of K
40
20
10
6
4
35
30
25
Units
of L
5
12
20
30
50
Point on
diagram
a
b
c
d
e
20
15
10
5
0
0
10
15
20
25
30
35
40
45
50
40
Units
of K
40
20
10
6
4
35
30
25
Units
of L
5
12
20
30
50
Point on
diagram
a
b
c
d
e
20
15
10
5
0
0
10
15
20
25
30
35
40
45
50
Features of ISOQUANTS
DOWNWARD SLOPING:
An
isoquant
must
slope
downwoards from left to right
Which implies that using more
of one input to produce the
same level of output must imply
using less of the other inputs
CONVEX TO ORIGIN:
Isoquants are convex to the orgine.
It is because the input factors are not
perfect substitutes.
One input factor can be substituted by
another input factor in a diminishing
marginal rate
If the input factors were perfect
substitutes, the isoquant would be a
falling straight line.
Assumptions
30
25
TC = 200 000
20
TC = 300 000
15
TC = 400 000
10
TC = 500 000
5
0
0
10
20
30
40
50
proportion
Complementary inputs MRTS=0
McGraw-Hill/Irwin
DO NOT INTERSECT:
Two isoquants do not intersect.
It is because each of these denote a
particular level of output.
McGraw-Hill/Irwin
An isoquant map
30
20
10
Q1
0
0
10
Q5
Q4
Q3
Q2
20
INDEX
Isocosts
Least-cost Combination Of
Inputs
Cobb-Douglas production
function
Law of Return to Scale
ISOCOSTS
1
8
1
9
The
three
download sloping
straight line cost
curves (assuming
that the input
prices are fixed,
no
quantity
discount
are
available)
each
costing
Rs.1.0
lakh, Rs.1.5 lakh
and Rs.2.0 lakh
for the
output
leavels of 20,00030,000 and 40,000
units.
c
a
p
i
t
a
l
I
C
=
1
.
0
I
C
=
1
.
5
I
C
=
2
.
0
Labour
The total cost as represented by each cost
curve, is calculated by multiplying the quantity
of each input factor with its respective price.
Least-Cost Combination
2
0
2
1
Scale line
Units of
Capital (K)
A
C
B
x
22
9-
2
5
2
6
Dr.K.Baranidhara
n THANK YOU