Isoquant analysis, Managerial Economics

Assignment Help:

ISOQUANT ANALYSIS

In the long run it is possible for a firm to produce the same output using different combinations of two factors of production.  For instance it the two factors of production, are capital and labour, then labour may be substituted for capital or vice versa.  Thus for instance an output of 69 units of X can be produced by using units of capital and one unit of labour or six units of labour and one unit of capital.

If the various combinations of factors of production which produce the same amount of output are plotted on a graph this produces an isoquant or equal product curve.

1409_isoquant analysis.png

Theoretically, we can construct any number of isoquants on the graph to produce an isoquant map.  They are downward sloping because although capital can be substituted for labour or vice versa they are not perfect substitutes.  Therefore as we substitute capital for labour, for example, it takes more and more units of capital to replace labour, as capital becomes a less and less perfect substitute.  Like indifference curves isoquants can never intersect.  The slope of the isoquant shows the substitution ratios of the factors of production.


Related Discussions:- Isoquant analysis

Investment firm sells options, Let Consider an economy with three states. T...

Let Consider an economy with three states. The following set of stocks is traded:     x 1 =(2,2,0)    x 2 =(1,0,3)  x 3 =(0,2,4).          The t=0 prices of these stocks are give

Explain about delphi method, Q. Explain about Delphi method? Delphi me...

Q. Explain about Delphi method? Delphi method: This is a systematic, interactive forecasting method that depends on a panel of experts. Experts answer questionnaires in two o

Importance of cross elasticity, Importance of Cross Elasticity Knowled...

Importance of Cross Elasticity Knowledge of cross elasticity is necessary when the government wants to impose a tariff on an imported commodity to protect a domestic industry.

Using total expenditure for calculating national income, Using Total Expend...

Using Total Expenditure for Calculating National Income The expenditure approach centres on the components of final demand which generate production.  It thus measures GDP

State the fixed factor of production, State the Fixed factor of production ...

State the Fixed factor of production Input level of a fixed factor can't be varied in the short run. Capital falls under the category of fixed factor. Capital alludes to resour

Short run cost curve, Ajax has the following short run cost curve when tc=8...

Ajax has the following short run cost curve when tc=800000-5000Q+100Q2

Effectiveness of trade unions in developing countries, Effectiveness of Tra...

Effectiveness of Trade Unions in Developing Countries Trade Unions in developing countries tend to be less effective in their wage negotiations with employers than their count

Marris Model, Explaination of the Marris Model

Explaination of the Marris Model

Marginal social cost, Suppose that there is a fixed sum of money available ...

Suppose that there is a fixed sum of money available to be spent on public projects, and that a large number of public projects have been evaluated using social cost-benefit analys

Determinants of money supply, DETERMINANTS OF MONEY SUPPLY The total su...

DETERMINANTS OF MONEY SUPPLY The total supply of nominal money in the economy is determined by the joint behaviour of the central bank which controls the total issue of the hig

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd