ISOQUANT PROPERTIES PDF

Iso-Quant Curve: Definitions, Assumptions and Properties! The term Iso-quant or Iso-product is composed of two words, Iso = equal, quant = quantity or product. The term ‘isoquant’ is composed of two terms ‘iso’ and ‘quant’. Iso is a Greek word which means equal and quant is a Latin word which means. Property 2: An isoquant curve, because of the MRTS effect, is convex to its origin. This indicates that factors of production may be substituted.

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If one of the factors becomes relatively dearer, the iso-cost line will contract inward to the left. In the same way, we can find out point A and B on iso-quant curves IP and IP2 propertifs marginal productivity of labour will be zero. CD touches IQ 1 at point E 1 which will constitute the new equilibrium point.

The line RP shows how larger quantities of labour can be employed to expand production. Iisoquant only an unwise entrepreneur will produce in the dotted region of the iso-quant In the figure, MRTS properites any two points is given by the slope between those points.

Unless you are signed in to a HubPages account, all personally identifiable information is anonymized. Let us suppose that EF is 20 units of labour and FG is 10 units of labour. The vertical straight line LM is drawn on the assumption that labour is held constant at OL and output is expanded by adding more capital.

Hence, the isoquant cannot be a horizontal straight line like AB. Marginal rate of technical substitution MRTS indicates the rate at which one factor labor can be substituted for the other input capital in the production process of a commodity without changing the level of output or production. For example, in Figure 13 A the proportions of capital and labour used to produce IQ 1 units of the product are different from the proportions of these factors used to produce IQ 2 units or units at the lowest cost.

It refers to those different combinations of two factors that a firm can obtain at the same cost. This service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles.

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The points such as H, K, R and S lie on higher iso-cost lines. Returns to a factor refers to the behavior of output in response to changing application of one factor of production while other factors remaining constant. In Figure 15, P 1 L 1 iso-cost line has become tangent to iso-product curve representing units isoquznt output at point E.

It is the line which shows the various combinations of factors that will result in the same level of total cost.

Isoquant – Meaning and Properties

Isoquants need not be parallel The shape of an isoquant isouant upon the marginal rate of technical substitution. Nice information about the topic Thanks sir. In the up dotted portion, more capital and in the lower dotted portion more labour than necessary is employed.

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.

Properties of Iso-quant curve

Given the price of capital, if the price isoquamt labour falls, the isocost line EF in Panel B of figure 13 will extend to the right as EG and if the price of labour rises, the iso-cost line EF will contract inward to isoquatn left as EH, if the equilibrium points L, M, and N are joined by a line. Lines which represent the limits of the economic region of production are called ridge lines.

Just as two indifference curves cannot cut each other, two isoquants also cannot cur each other. This means that units increase in output can be obtained by employing successively lesser increments of labour. As two indifference curves cannot cut each other, two propperties curves cannot cut each other. Suppose the firm decides to produce 10 units of output. A producer will operate in this region.

Other product and company names shown may be trademarks of their respective owners. A rational producer will chose this combination of factors, given the factor prices.

Properties of Isoquants 1. It will unnecessarily increase the cost of production. The importance of ridge lines is explained with the help of Figure propreties The dotted segments of an isoquant are the waste- bearing segments.

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What are the properties of Iso-quant Curve? Business Jargons

The properties of isoquants are similar to the properties of indifference curves. If the unit cost of labour L is w and the unit cost of capital C is r, then the total cost: It will be called the price-factor curve.

It is also known as optimum combination of the factors.

The price of labour per hour is Rs. This website uses cookies As a user in the EEA, your approval is needed on a few things. In other words the rays show the returns to scale which implies that to increase output both the inputs should be increased in the same proportion.

Isoquant – Meaning and Properties | ToughNickel

Hence, it is proved that pro;erties higher isoquant shows a higher level of output. The returns to a factor can be explained using isoquant techniques. This shape is a consequence of the fact that if a producer uses more of capital or more of labour or more of both than is necessary, the total product will eventually decline. We can also see that the combination A lies on Iq 1 and combination B lies on Iq 2.

In other words, after OL 3marginal productivity of labour will be zero. This is used to identify particular browsers or devices when the access the service, and is used for security reasons. The iso-cost line is similar to the price or budget line of the indifference curve analysis. If keeping OR3 units of labour constant, more than OM3 units of labour are used, the total output will be less than 60 quintals of wheat.

The slope of the iso-cost line represents the price ratio of the two factors. Propertise principle of marginal rate of technical substitution MRTS or MRS is based on the production function where two factors can be substituted in variable proportions in such a way as to produce a constant level of output.

They are just like contour lines which show the different levels of output. Thank you so much for properhies very good and understandable content.