ISOQUANT
• Production function
• Isoquants
• Types of Isoquants
• Properties of Isoquants
• Characteristics of Isoquants
• Iso-cost Line
• How Isoquant is related to producer
equilibirium
Production Function
The relationship between the inputs, the production
process and the resulting output is described by a
production function.
P(A) = f (L,K)
Where, L = labour, K= capital, P= Output
Fixed Input
A fixed input is defined as one whose quantity cannot be changed
instantaneously in response to changes in market condition
requiring an immediate change in output.
Ex. Building, major capital equipment and managerial personnel.
Variable Input
Variable input is one whose quantity can be changed readily when
market condition suggest that an immediate change in output is
beneficial to the producer.
Ex. Raw material and labour services.
ISOQUANTS
Anisoquant is the locus of all the combinations of two factors of
production that yield the same level of output.
An isoquant is a firm’s counterpart of the consumer’s indifference
curve.
‘ISO’ means equal and ‘quant’ means quantity.
Therefore an isoquant represents a constant quantity of output.
It is also known as an ’Equal product curve’ or ‘production
indifference curve’ or ‘iso-product curve’.
ASSUMPTIONS
The main assumptions of Iso-quant curves are as follows:
1. Two Factors of Production:
Only two factors are used to produce a commodity.
2. Divisible Factor:
Factors of production can be divided into small parts.
3. Constant Technique:
Assumptions
Technique of production is constant or is known before hand.
4. Possibility of Technical Substitution:
The substitution between the two factors is technically possible.
That is, production function is of ‘variable proportion’ type
rather than fixed proportion.
5. Efficient Combinations:
Under the given technique, factors of production can be used
with maximum efficiency.
Shapes of Isoquants
Linear Isoquants
A case of perfect substitutability of production
factors.
Isoquants shapes of a straight line sloping
downwards from left to right.
Input-Output Isoquants
Here factors of production are not substitutes but there
co-efficients are fixed.
Shape of it is right angled ‘L’ shaped.
In case of Perfect complimentary factors
Characteristics of Isoquants
A) Isoquants are convex to the origin
because of Marginal Rate of Technical
Substitution (MRTS).
B) Isoquants are negatively sloped
because when the quantity of capital is increased, the
quantity of labor should be reduced so as to keep the
same levelof output.
C) A higher curve represents a larger
output.
D) Two isoquants never intersect
each other.
CHARACTERISTICS OF ISOQUANTS
Isoquants are oval shaped. The firm produces only those
segments of the isoquant curves which are convex to the
origin and lie between the ridge lines. This is the
economic region of production.
Two or more isoquant curves in a same graph is known
as a Isoquant Map which shows technically efficient
combinations of inputs that can be produced at different
levels of output.
Isoquants need not to be parallel
Iso-cost Line
The combination of factor-inputs with
which a firm produces output depends
upon the quantity of output that the
firm wants to produce. Besides, the
combination of factor-inputs also
depends upon the amount of money that
the firm wants to spend and prices of
the factor-inputs.
How Isoquant is related to Producer’s
Equilibirium ?
An isoquant enables a producer to get
those combinations of factor that yield
maximum output.
Iso-cost line provides the ratio of prices
of factors of production and the amount that
a producer is willing to spend.
A producer needs to obtain a combination
that helps in producing maximum output with
the least price, so that it can attain
equilibirium.
The equilibrium position obtained with the
help of isoquant and iso-cost line:
The producer can produce 60 units
of output by using any
combinations that is R, Q, and S,
on curve IP’. He/she would select
the combination that would obtain
the lowest cost.
It can be seen from the given figure that Q lies on the lowest iso-
cost line and would yield same profit as on R and S points, at the
lowest cost. In such a case, Q is the point of equilibrium;
therefore, it would be selected by the producer.
COMPARISON & DIFFERENCES
ISOQUANT CURVE INDIFFERENCE CURVE
Related with Related with
PRODUCTIONtheory.... DEMANDtheory...
Shows the various Shows the various
combinations of two combination of two
inputs on an equal commodities...
output... It shows the constant
It shows constant level of level of
output which can be satisfaction which can’t
measured... be measured.
ISOQUANT CURVE INDIFFERENCE CURVE
It represents combination of
It represents combination
two commodities...
of two factors.
It provides economic and
uneconomic region of It provides no information
production... about economic and
uneconomic region of
consumption of goods
The slope is influenced by The slope is influenced by
the technical possibility of
Marginal Rate of Substitution
substitution between between commodity
production.. consumed by the consumer...
