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

Arguments against protectionism, Arguments against protectionism   Mos...

Arguments against protectionism   Most of the arguments for protectionism may be met with counter arguments, but underlying the economic arguments as opposed to the social, mo

Question, what is deadweight loss calculation?

what is deadweight loss calculation?

Derevatives ., how to solve problems using derivatives ?

how to solve problems using derivatives ?

Public Debt, what are the Sources of public debt

what are the Sources of public debt

Compensatory financing, Compensatory Financing Two other schemes for a...

Compensatory Financing Two other schemes for alleviating the effects of commodity trade instability have been operating for a number of years.  These are the IMF's Compensator

Evaluate total cost - fixed and variable, Q. Evaluate Total Cost - Fixed an...

Q. Evaluate Total Cost - Fixed and Variable ? Total cost (TC) of the firm is a function of output (q). It would increase with the increase in output, which is, it differs dire

Investment demand theory , In the national income analysis, investment ref...

In the national income analysis, investment refers to the value of than part of the aggregate output for any given time period which takes the form of construction of new structure

Explain the confidence interval, 1.  According to an article in San Luis Ob...

1.  According to an article in San Luis Obispo Tribune July 21, 2006 37% of the college freshman and 48% of the college seniors carry a credit balance from month to month. Suppose

Functions of budget, Functions of the Budget The budget fulfils three ...

Functions of the Budget The budget fulfils three main functions: To raise revenue to meet government expenditure The government of a country provides certain se

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