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

Estimating economic relationships, Estimating economic relationships M...

Estimating economic relationships Managerial economics estimates economic relationships between various business factors likeelasticity of demand, income, profit analysis, cos

Supply of money, The supply of money Refers to the total amount of mon...

The supply of money Refers to the total amount of money in the economy. Most countries of the world have two measures of the money stock - broad money supply and narro

ECONOMIC THEORY, How does economic theory contribute to managerial decision...

How does economic theory contribute to managerial decisions?

Limitation of managerial economics, what are the limitation of managerial e...

what are the limitation of managerial economics and what is the solution of it?

Calculate the disk capacity and maximum data transfer rate, Consider a magn...

Consider a magnetic disk consisting of 16 heads and 400 cylinders. This disk is divided into four 100-cylinder zones with the cylinders in different zones containing 160, 200, 240,

Types of public debt, Types of Public Debt Public debts can be classif...

Types of Public Debt Public debts can be classified according to the purpose for which the money was borrowed into; a.           Reproductive Debt:  where a loan has been

Economic theories, Topic:  Company Case Study and Industry Analysis   ...

Topic:  Company Case Study and Industry Analysis   Instruction:  1) choose a company;                     2) recognize the market industry type;                     3)

Phillips curve, PHILLIPS CURVE   The Phillips  curve,  named  after  A....

PHILLIPS CURVE   The Phillips  curve,  named  after  A.  W.  Phillips,  describes  the  relationship between unemployment  and  inflation. In  1958  Phillips, then  professor a

New york offers the payout, Lots of states have scratch offs with various d...

Lots of states have scratch offs with various different monetary payoffs. For example, the "$500 a week for life" in New York offers the payout and odds structure noted below.

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