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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.
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.
Q. Explain about Linear Isoquant? : In this case, isoquant would be straight lines as in Figure below. This type presumes perfect substitutability of factors of production. I
Q. Concept of economies of scale? Economies of scale refers to the cost advantages that a business attains because of expansion. 'Economies of scale' is a long run concept and
p=10, TC= 1000+2Q+.01Q^2, Q=?
The emergence of managerial economics as a separate course of management studies can be attributed to at least three factors: 1. Growing complexity of business designs maki
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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
The acme paper company lowers its price of envelopes (1000 count) from $6to $5.40.
Interest rates Decreasing the rate of interest may not encourage investment but increasing the interest rate tends to lock up liquidity in the financial system.
Factors determining Elasticity of demand Ease of substitution. Nature of the commodity i.e. whether it is a necessity of life, luxury or addictive. Consumers
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