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

What is the significance of managerial economics, Significance of manageria...

Significance of managerial economics Industrial and Business enterprises aim at earning maximum proceeds. In order to attain this objective, a managerial executive has to take

Implications for the shape of cost function, Q. Implications for the shape ...

Q. Implications for the shape of cost function? A cost function is also a mathematical relationship, one which relates the expenses an organisation incurs on the quantity of ou

Elastic supply, Elastic Supply Supply is said to be price elastic if c...

Elastic Supply Supply is said to be price elastic if changes in price bring about changes in quantity supplied in greater proportion.  Thus, when price increases, quantity sup

Mixed economy, The Mixed Economy There are no economies in the world w...

The Mixed Economy There are no economies in the world which are entirely 'market' or planned, all will contain elements of both systems. The degree of mix in any one econom

A cost-push inflation , A cost-push inflation have as a result of workers' ...

A cost-push inflation have as a result of workers' attempts to push up their wages. Thus, inflation does not have to be monetary phenomenon." Is this statement true, false, or unce

Price of cereal - cross price elasticity of demand, Suppose that the price ...

Suppose that the price elasticity of demand for cereal is -0.75 and the cross-price elasticity of demand between cereal and the price of milk is -0.9. If the price of milk rises by

Dumping - reason for protection, Dumping If goods are sold on a foreig...

Dumping If goods are sold on a foreign market below their cost of production this is referred to as dumping.  This may be undertaken either by a foreign monopolist, using high

Describe the optimisation of managerial economics, Describe the Optimisatio...

Describe the Optimisation of managerial economics Optimisation techniques are perhaps the most vital to managerial decision making. Given that alternative courses of action are

Nature and functions of money , Nature and Functions of Money The concep...

Nature and Functions of Money The concept of money is very difficult to define . it is belongs to the category of things which are not amenable to any single definition. It is p

Managerial principles, managerial principles to consider when determining l...

managerial principles to consider when determining level of output of afirm

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