What is Isoquant and Isocost curve?

What is Isoquant and Isocost curve?

An isoquant shows all combination of factors that produce a certain output. An isocost show all combinations of factors that cost the same amount. Isocosts and isoquants can show the optimal combination of factors of production to produce the maximum output at minimum cost.

Why can’t two Isoquants cross?

Hence, it is proved that a higher isoquant shows a higher level of output. Just as two indifference curves cannot cut each other, two isoquants also cannot cur each other. If they intersect each other, there would be a contradiction and we will get inconsistent results. Therefore, isoquants cannot intersect.

What is Isoquant with diagram?

An isoquant map is a set of isoquants, each of which shows the maximum output that can be achieved for any set of inputs. An isoquant map is an alternative way of describing a production function, just as an indifference map is a way of describing a utility function.

What are the types of Isoquant?

• Marginal Rate of Technical Substitution (MRTS) Marginal Rate of Technical Substitution is the proportion at which the one production factor partially replaces the other, to produce consistent output.
• Linear Isoquant.
• Smooth Convex Isoquant.
• Leontief or Right Angled Isoquant.
• Kinked Isoquant.

What is an Isoquant line?

An isoquant (derived from quantity and the Greek word iso, meaning equal), in microeconomics, is a contour line drawn through the set of points at which the same quantity of output is produced while changing the quantities of two or more inputs.

What is kinked Isoquant curve?

Kinked Isoquant: Refers to an isoquant that represents different combinations of labor and capital. These combinations can be used in different processes of production, but in fixed proportion. According to L-shaped isoquant, there would be only one combination between capital and labor in a fixed proportion.

What is slope of Isoquant?

The slope of an isoquant at any point is the slope of a tangent line at that point. The slope is called the marginal rate of technical substitution (MRTS). It tells the firm how much capital is needed to replace a unit of labor to maintain the output.

What does MRTS 4 mean?

What does a MRTS=4 mean? MRTS is the amount by which the quantity of one input can be reduced when the other input is increased by one unit, while maintaining the same level of output. If the MRTS is 4 then the one input can be reduced by 4 units as the other is increased by one unit and output will be the same.

What is the full form of MRTS?

The marginal rate of technical substitution (MRTS) is an economic theory that illustrates the rate at which one factor must decrease so that the same level of productivity can be maintained when another factor is increased.

What is an Isocost point?

In economics an isocost line shows all combinations of inputs which cost the same total amount. Equivalently, it gives the maximum level of output that can be produced for a given total cost of inputs. A line joining tangency points of isoquants and isocosts is called the expansion path.

Which Isoquant is a realistic type of curve?

Linear Iso-quant Curve: This curve shows the perfect substitutability between the factors of production. According to this, there is only one method of production to produce any one commodity. This curve is also known as Leontief Iso-quant, input-output isoquant and is a right angled curve.

What would an upward sloping Isoquant imply?

An upward sloping isoquant would mean that if you increased both inputs output would stay the same. This would occur only if one of the inputs reduced output; sort of like a bad in consumer theory. As a general rule, if the firm has more of all inputs it can produce more output.

What determines the shape of an Isoquant?

Isoquants are usually downward sloping convex curves whose shape depend on the degree of substitution between different inputs. Isoquants are plotted with labor on one axis (generally the x-axis) and capital on the other axis i.e. the y-axis.

Why are Isocost lines straight lines?

Why are isocost lines straight lines? The isocost line represents all possible combinations of labor and capital that may be purchased for a given total cost. If input prices are fixed, then the ratio of these prices is clearly fixed and the isocost line is straight.

What shows the overall output generated at a given level of input?

Marginal rate of technical substitution.

How do you find the input and output of a function?

Relations can be written as ordered pairs of numbers or as numbers in a table of values. By examining the inputs (x-coordinates) and outputs (y-coordinates), you can determine whether or not the relation is a function. Remember, in a function each input has only one output.

What is TP MP and AP?

The TP is total product, MP is marginal product and AP is average product. 1. This relationship between the variable input and output, keeping all other inputs constant, is often referred to as total product of the variable input. 2.

How many laws of return are there?

Earlier economists differentiated between three laws of returns also referred to as laws of production viz., law of diminishing, increasing and constant returns. Modern economists are of the view that these three laws are really three aspects of same law viz., the Law of variable proportions.

What are the laws of returns?

 The law of returns to scale describes the relationship between variable inputs and output when all the inputs , or factors are increased in the same proportion.  For example, if a firm increases inputs by 100% but the output decreases by less than 100%, the firm is said to be exhibit decreasing returns to scale.

What is Law of Return scale?

The law of returns to scale explains the proportional change in output with respect to proportional change in inputs. In other words, the law of returns to scale states when there are a proportionate change in the amounts of inputs, the behavior of output also changes.

What is law of return to a factor?

Returns to a factor and returns to scale are two important laws of production. Returns to a factor relate to the short period production function when one factor is varied keeping the other factor fixed in order to have more output, the marginal returns of the Variable factor diminish.

When the total product is maximum?

When marginal product of a factor is zero then total product will be maximum.

When MP is zero what will be TP?

B. When MP is zero, TP is maximum. Step by step solution by experts to help you in doubt clearance & scoring excellent marks in exams.

What is the other name of return to a factor?

Returns to factors are also called factor productivities. Productivity is the ratio of output to the input. Factor productivity refers to the short-run relationship of input and output. The productivity of one unit of a factor of production will be equal to the output it can generate.