Understanding Isoquants in Production Economics
Isoquants in production economics represent different combinations of inputs that result in the same level of output. They play a crucial role in understanding factor substitution and efficiency in production processes. These graphical representations help analyze the relationship between labor and capital inputs and their impact on output levels, ensuring optimal resource allocation.
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Presentation Transcript
BY PROF. GAYATHRI IYENGAR (Department of commerce)
OUTLINE 1.MEANING 2. DEFINITION 3. PRINCIPLE OF MRTS 4. SCHEDULE OF MRTS 5. ASSUMPTION OF ISOQUANT 6.SCHEDULE OF ISOQUANT 7.PROPERTIES OF ISOQUANT 8. SIGNIFICANCE OF ISOQUANT OUTLINE
ISOQUANT=ISO PRODUCT CURVE COMBINATION OF TWO WORDS ISO=EQUAL QUANT =QUANTITY LOCUS OF THE POINT REPRESENTING VARIOUS COMBINATION COMBINATION= TWO INPUT (CAPITAL, LABOUR) ONE FACTOR ANOTHER OUTPUT
Isoproduct curve represents all possible combinations of two factor that will give the same total product KEIRSTEAD In short we can say that an isoquant is a curve on which the various combinations of labour and capital show the same output.
Full form- Marginal rate of technical substitution It indicates the rate at which factor can be substituted. Substitution as the resources are limited and wants are unlimited . Substitution leads the same yield.
FACTOR COMBINATIO N N A B C D FACTOR COMBINATIO LABOUR (X) LABOUR (X) CAPITAL (Y) CAPITAL (Y) OUTPUT OUTPUT MRTS MRTS 1 2 3 4 15 12 10 9 50 50 5O 50 - 3:1 2:1 1:1
Only two factor of production Substitution of factors Technology remains constant Factor of production can be divided into various proportions FOP s can be used in most efficient use
FACTOR COMBINATION FACTOR COMBINATION LABOUR LABOUR CAPITAL CAPITAL OUTPUT OUTPUT A B C D 1 2 3 4 15 12 10 9 200 200 200 200
NEGATIVE SLOPE CONVEX TO ORIGIN NO ISOQUANT CAN INTERSECT EACH OTHER ISOQUANT LYING ABOVE REPRESENT HIGHER LEVEL NO ISOQUANT SHOULD BE PARALLEL ISOQUANT NEVER TOUCHES EITHER AXIS
TO MINIMIZE COST OF PRODUCTION. IT ILLUSTRATE ALL POSSIBLE COMBINATION. TO DETERMINE PRODUCERS BUDGET LINE. HELPS IN FIRMS DECISION MAKING.
