Comparing combination A with B, we see that 4 units of capital is replaced by 1 unit of labor, without altering the output. Therefore, is the marginal rate of technical substitution in this case. In the figure, MRTS between any two points is given by the slope between those points. In the same way, MRTS at any particular point on the isoquant curve can be calculated by finding the slope of the line that is tangent to that point on the curve. Properties of Isoquant Curve The isoquant curve has almost the same properties as are possessed by the indifference curve of the theory of consumer behavior.
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By Will Kenton Updated Sep 10, The isoquant curve is a graph, used in the study of microeconomics , that charts all inputs that produce a specified level of output. This graph is used as a metric for the influence that the inputs have on the level of output or production that can be obtained. The isoquant curve assists firms in making adjustments to inputs to maximize outputs, and thus profits.
Essentially, the curve represents a consistent amount of output. The isoquant is known, alternatively, as an equal product curve or a production indifference curve.
It may also be called an iso-product curve. Isoquant Curve vs. Indifference Curve The isoquant curve is a contoured line that is drawn through points that produce the same quantity of output, while the quantities of inputs — usually two or more — are changed.
The mapping of the isoquant curve addresses cost minimization problems for producers. The indifference curve, on the other hand, helps to map out the utility maximization problem that consumers face.
The Properties of an Isoquant Curve Property 1: An isoquant curve slopes downward, or is negatively sloped. This means that the same level of production only occurs when increasing units of input are offset with lesser units of another input factor. As an example, the same level of output could be achieved by a company when capital inputs increase, but labor inputs decrease. This indicates that factors of production may be substituted with one another.
The increase in one factor, however, must still be used in conjunction with the decrease of another input factor. Property 3: Isoquant curves cannot be tangent or intersect one another. Curves that intersect are incorrect and produce results that are invalid, as a common factor combination on each of the curves will reveal the same level of output, which is not possible.
Property 4: Isoquant curves in the upper portions of the chart yield higher outputs. This is because, at a higher curve, factors of production are more heavily employed.
Either more capital or more labor input factors result in a greater level of production. Property 5: An isoquant curve should not touch the X or Y axis on the graph. If it does, the rate of technical substitution is void, as it will indicate that one factor is responsible for producing the given level of output without the involvement of any other input factors.
Property 6: Isoquant curves do not have to be parallel to one another; the rate of technical substitution between factors may have variations. Property 7: Isoquant curves are oval shaped, allowing firms to determine the most efficient factors of production. Compare Accounts.
Iso-Quant Curve: Definitions, Assumptions and Properties
Thus it means equal quantity or equal product. Different factors are needed to produce a good. These factors may be substituted for one another. Iso-quant curves are also known as Equal-product or Iso-product or Production Indifference curves.
Isoquants: Meaning, Assumptions and Properties
By Will Kenton Updated Sep 10, The isoquant curve is a graph, used in the study of microeconomics , that charts all inputs that produce a specified level of output. This graph is used as a metric for the influence that the inputs have on the level of output or production that can be obtained. The isoquant curve assists firms in making adjustments to inputs to maximize outputs, and thus profits. Essentially, the curve represents a consistent amount of output. The isoquant is known, alternatively, as an equal product curve or a production indifference curve. It may also be called an iso-product curve. Isoquant Curve vs.
Properties of Iso-quant curve
Labor and Capital employed to yield the given level of production. Properties of Iso-quant Curve The iso-quant curve is negatively sloped, which means, in order to have a same level of production, the more use of units of one input factor is to be offset with the lesser units of another input factor. For example, with more units of capital, the lesser units of labor are to be employed to have a same level of output. In the figure, it is clear that the reduction in capital is to be set off with the increase in the labor, and thus, the IQ is negatively sloped. The iso-quant curve is convex to the origin because of the MRTP effect. This shows that factors of production are substitutable for each other and with the increase in one factor the other has to be reduced to have the same level of production.