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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Both curves IQ1 and IQ2 represent two levels of output. We may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites. In Figure 10, oval shaped isoquants are shown.
Isoquants: Meaning, Assumptions and Properties
We can therefore know the distance between two equal product curves. The distance between different iso-quants remains equal.
propertiex Given the price of capital, if the price of 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 the left as EH, if the equilibrium points L, M, and N are joined by a line. The point where the iso-cost line is tangent to an isoquant shows the least cost combination of the two factors for producing a given output.
With a given outlay and prices of two factors, the firm obtains least cost combination of factors, when the iso-cost line becomes tangent to an iso-product curve. These logical absurdities for OL units of labour alone are unable to produce anything. Iso-quant curve represents the combinations of the factors whereas indifference curve represents the combinations of the goods.
These ridge lines show the economical limits for the firm to produce only in those segments of the iso-quants which lie between the ridge lines.
Isoquant – Meaning and Properties | ToughNickel
This is because of the operation of the principle of diminishing marginal rate of technical isoqaunt. It can also be defined as the slope of an isoquant.
An isoquant slopes downwards from left to right. At this point, the slope of the iso-cost line is equal to the iso-product curve. Since the rate of substitution between two factors need not necessarily be the same in all the isoquant schedules, they need not be parallel. These points have been joined by OR ridge line. If they are concave, MRTS of labor for capital increases. It obtains least cost combination of the two factors to produce 5 00 units of the commodity.
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. Non-consent will result in ComScore only processing obfuscated personal data. In the figure, MRTS between any two points is given by the slope between those points.
If an isoquant touches X-axis, it would mean that the product is being produced with the help of labour alone without using capital at all. The above table is based on the assumption that only two factors of production, namely, Labor and Capital are used for producing meters of cloth. The producing firm is in equilibrium. Similarly, OC units of capital alone cannot produce anything without the use of labour.
Ridge lines may be defined as lines separating the downward sloping portions of a series of isoquants from the upward sloping portions. Sign in or sign up and post using a HubPages Network account. Money, Real and Opportunity Costs. An isoquant curve may be defined as a curve showing the possible combinations of two variable factors that can be used to produce the same total product.
No data is shared with Paypal unless you engage with this feature. To put it differently, as more units of labour are used, and as certain propergies of capital are given up, the marginal productivity of labour in relation to capital will decline.
The slope of the iso-cost line is the ratio of prices of labour and capital i. 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.
The following table shows the various combinations of labour and machine capital hours required to produce 10 units of output. The substitution between the two factors is technically possible.
Other product and company names shown may be trademarks of their respective owners. In the case of an isoquant, the product can be precisely measured in physical units. The downward sloping iso-product curve can iskquant explained with the help of the following figure: Let us explain it with the following Fig.