ISOQUANT

Meaning
An isoquant is a firm‟s counterpart of the consumer‟s indifference curve. An isoquant is a curve
that shows all the combinations of inputs that yield the same level of output. „Iso‟ means equal
and „quant‟ means quantity. Therefore, an isoquant represents a constant quantity of output. The
isoquant curve is also known as an “Equal Product Curve” or “Production Indifference Curve” or
Iso-Product Curve.”

The concept of isoquants can be easily explained with the help of the table given below:

Table 1: An Isoquant Schedule

Combinations of Units of Labor Units of Capital Output of Cloth

Combination A = 5L + 9K = 100 meters of cloth

Combination B = 10L + 6K = 100 meters of cloth

Combination C = 15L + 4K = 100 meters of cloth

Combination D = 20L + 3K = 100 meters of cloth

The combinations A, B, C and D show the possibility of producing 100 meters of cloth by
applying various combinations of labor and capital. Thus, an isoquant schedule is a schedule of
different combinations of factors of production yielding the same quantity of output.

An iso-product curve is the graphic representation of an iso-product schedule.

Isoquant Map

An isoquant map is a set of isoquants that shows the maximum attainable output from any given
combination inputs.

Isoquants Vs Indifference Curves

An isoquant is „analogous‟ to an indifference curve in more than one way. The properties of
isoquants are similar to the properties of indifference curves. However, some of the differences
may also be noted. Firstly, in the indifference curve technique, utility cannot be measured. In the
case of an isoquant, the product can be precisely measured in physical units. Secondly, in the
case of indifference curves, we can talk only about higher or lower levels of utility. In the case of
isoquants, we can say by how much IQ2 actually exceeds IQ1 (figure 2).
Properties of Isoquants
1. An isoquant lying above and to the right of another isoquant represents a higher level of
output.

This is because of the fact that on the higher isoquant, we have either more units of one factor of
production or more units of both the factors. This has been illustrated in figure 3. In figure 3,
points A and B lie on the isoquant IQ1 and IQ2respectively.

At point A we have = OX1 units of Labor and OY1 units of capital.

At point B we have = OX2 units of Labor and OY1 units of capital.

Though the amount of capital (OY1) is the same at both the points, point B is having X1X2 units
of labor more. Therefore, it will yield a higher output.

Hence, it is proved that a higher isoquant shows a higher level of output.

2. Two isoquants cannot cut each other

Just as two indifference curves cannot cut each other, two isoquants also cannot cut each other. If
they intersect each other, there would be a contradiction and we will get inconsistent results. This
can be illustrated with the help of a diagram as in figure 4.
In figure 4, the isoquant IQ1 shows 100 units of output produced by various combinations of
labor and capital and the curve IQ2 shows 200 units of output,

On IQ1, we have A = C, because they are on the same isoquant.

On IQ2, we have A = B

Therefore B = C

This is however inconsistent since C = 100 and B = 200. Therefore, isoquants cannot intersect.

3. Isoquants are convex to the origin

An isoquant must always be convex to the origin. This is because of the operation of the
principle of diminishing marginal rate of technical substitution. MRTS is the rate at which
marginal unit of an input can be substituted for another input making the level of output remain
the same.

In figure 5, as the producer moves from point A to B, from B to C and C to D along an isoquant,
the marginal rate of technical substitution (MRTS) of labor for capital diminishes. The MRTS
diminishes because the two factors are not perfect substitutes. In figure 5, for every increase in
labor units by (ΔL) there is a corresponding decrease in the units of capital (ΔK).

It cannot be concave as shown in figure 6. If they are concave, MRTS of labor for capital
increases. But this is not true of isoquants.
Since MRTS must diminish, the isoquants must be convex to the origin.

4. No isoquant can touch either axis

If an isoquant touches the X-axis it would mean that the commodity can be produced with OL
units of labor and without any unit of capital.

Point K on the Y-axis implies that the commodity can be produced with OK units of capital and
without any unit of labor. However, this is wrong because the firm cannot produce a commodity
with one factor alone.

5. Isoquants are negatively sloped

An isoquant slopes downwards from left to right. The logic behind this is the principle of
diminishing marginal rate of technical substitution. In order to maintain a given output, a
reduction in the use of one input must be offset by an increase in the use of another input.
Figure 8 shows that when the producer moves from point A to B, the amount of labor increases
from OL to OL1, but the units of capital decreases from OK to OK1, to maintain the same level
of output.

The impossibility of horizontal, vertical or upward sloping isoquants can be shown with the help
of the following diagrams.

Consider figure 9(A)

At point A, we have OL units of labor and OK units of capital and at B, we have OL1 units of
labor and OK units of capital.

OL1 + OK > OL + OK, and so combination B will yield a higher output than A. Therefore,
points A and B on the IQ curve cannot represent an equal level of the product. Hence, the
isoquant cannot be a horizontal straight line like AB.

Consider figure 9(B)

At point A, we have OL units of labor and OK units of capital. At point B, we have OL units of
labor and OK1 units of capital.
Since B is having KK1 more units of capital it is wrong to assume that both A and B will yield
the same level of output. The conclusion is that the isoquant cannot be a vertical straight line.

Similarly at point B in figure 9(C), we have LL1 units of more labor and KK1 units of more
capital. As compared to point A, both the inputs are higher at point B. Therefore, it is absurd to
assume that both the combinations A and B will give the same level of output.

6. Isoquants need not be parallel

The shape of an isoquant depends upon the marginal rate of technical substitution. Since the rate
of substitution between two factors need not necessarily be the same in all the isoquant
schedules, they need not be parallel.

7. Each isoquant is oval-shaped

An important feature of an isoquant is that it enables the firm to identify the efficient range of
production consider figure 11.
Both the combinations Q and P produce the same level of total output. But the combination Q
represents more of capital and labor than P. combinations Q must therefore be expensive and
would not be chosen. The same argument can be made to rule out combination T or any other
combination lying on a portion of the isoquant where the slope is positive. Positively sloped
isoquants imply that an increase in the use of labor would require an increase in the use of capital
to keep production constant.

In general, for any input combination on the positively sloped portion of an isoquant, it is
possible to find another input combination with less of both the inputs on the negatively convex
portion that will produce the same level of output. Therefore, only the negatively sloped segment
of isoquant is economically feasible.
In figure 12, the segment P1S1 is the economically feasible portion of the isoquant for IQ. If we
consider such feasible portions for all the isoquants, then the region comprising of these portions
is called the economic region of production. A producer will operate in this region. It is shown in
figure 12. The lines OP1P2 and OS1S2 are called ridge lines. Ridge lines may be defined as lines
separating the downward sloping portions of a series of isoquants from the upward sloping
portions. They give the boundary of the economic region of production.