Actions Shares. No notes for slide. Isoquants and its properties 1. Isoquants and its Properties. Production Function The relationship between the inputs to the production process and the resulting output is described by a production function. What are Isoquants? Total views 45, On Slideshare 0. From embeds 0. Number of embeds 3. Downloads Shares 0. Comments 0.
Likes You just clipped your first slide! Clipping is a handy way to collect important slides you want to go back to later. There are four factors of production, namely land, labor, capital and organization. These factors of production are essential to produce any good or service. An isoquant is a curve that is derived from various combinations of any two of the four factors of production and represents same level of output.
Though combinations of two factors change along the curve, the output remains constant. Thus, an isoquant helps a business to choose the best cost-effective combination of factors of production. There are two important assumptions of an isoquant. Firstly, the technical conditions are constant. This means that there are no changes in the available production technology. Secondly, the two factors of production under consideration are combined as efficiently as possible.
Very nice and detailed explanation and simple illustrations to understand easily Marine Biology. Electrical Engineering. Computer Science. Medical Science. Writing Tutorials. Performing Arts. Visual Arts. Student Life. Vocational Training. Standardized Tests. Online Learning. Social Sciences. Legal Studies. Therefore, the only way to maximise profit is to minimise cost.
This condition makes sense: This equals the ratio of marginal productivity of two inputs. Iso quants are equal revenue lines. He could do so using the combination represented by points A, B or C in Fig.
MKTS is, in fact, ieocosts ratio of the marginal products of the factors. Least cost input is a combination where the slope of isoquant is equal to the slope of isocost. Issocosts 14 Peculiarities of Labour Production Economics. It is known as the actual rate of factor substitution, the rate at which the firm can substitute labour by capital in the market place.
For example, suppose, the price of labour is Re. The significance of factors of productive resources is that, any two factors are substitutable e. Thus at a point of equilibrium marginal physical productivities of the two factors must be equal the ratio isoquantd their prices.
Only if a dollar spent on each input is equally productive is the input bundle optimal. Thus, profit maximisation and cost minimisation are the two sides of the same coin. Isoquants are typically drawn as being convex to the origin because of the assumed substitutability of inputs. The absolute value of the slope of the isocost line, with capital plotted vertically and labour plotted horizontally, equals the ratio of unit costs of labour and capital.
The isoquant shows- the whole range of alternative ways of producing - the same level of output. Properties or Features of Isoquant. The following are the important properties of isoquants:. Isoquant is downward sloping to the right. This means that if more of one factor is used less of the other is needed for producing the same output. A higher isoquant represents larger output. No isoquants intersect or touch each other. If so it will mean that there will be a common point on the two curves.
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