Group members

Pankaj Singh
Aatif Ahmed
Mujahid Sayed
Wahid Khan
Samina Mirkar
Ramakrishnan Iyer
Isoquants and its Properties.

Contents:-
 Production & Production function.
 Isoquants.
 Types of isoquants.
 Properties of isoquants.
 Isocosts & equilibrium of producers.
Production

 What is production?

 according to production manager

 according to economist
 Production Function

The relationship between the inputs to

the production process and the
resulting output is described by a
production function.

P(A)= f(L,K)
Fixed Inputs
 A Fixed input is defined as one whose
quantity cannot be changed instantaneously
in response to changes in market conditions
requiring an immediate change in output.

 Example-
Buildings, major capital equipment and
managerial personnel.
Variable Inputs
 Variable input is one whose quantity can be
changed readily when market conditions
suggest that an immediate change in output
is beneficial to the producer.

 Example-
Raw materials and labour services.
Short Run
 Short run is defined as that period of time in
which quantity of one or more inputs remains
fixed irrespective of the volume of output.

 Example-
Using more of raw material and employing an
increased number of workers with the
existing plant and equipment.
Long Run
 Long run refers to that period of time in which
all inputs are variable.

 Example-
Installation of additional machine and
employing more workers.
What are Isoquants?

An isoquant is the locus of all the combinations

of two factors of production that yield the
same level of output.
Isoquant Table showing combinations of Labour and
Capital Producing 100 units of X

Processes Units of Units of

Labour Capital
1 1 10
2 2 7
3 3 5
4 4 4
5 6 3
6 9 2
Convex isoquant
K

4 4

2
X
O 2 4
Y
L
Types of Isoquants

 Linear Isoquant

 Input- Output Isoquant

Linear Isoquant
Y
Y

O X

 A case of a perfect substitutability of production factors

 Isoquants shapes of a straight line sloping downwards
from left to right
Input- Output Isoquant
Y

 Here factors of production are not substitutes but their coefficients

are fixed
 Shape of it is right angled or ‘L’ shaped
 Also known as Leontief isoquant
Isoquant Map
 Output varies as the factor input change.
 Nearer the point of origin lower the production.
 Complete set of isoquants for the producers
Y

O X
 Isoquants nearer to the point of origin
represent relatively lower level of production.
Assumptions:-

 There are only two factors or inputs of

production.

 Divisible into small units.

 Technical conditions.
 Characteristics or Properties of
Isoquants

 Isoquants are negatively sloped.

 A higher represents a larger output.

 No two isoquants intersect or touch each other.

 Isoquants are convex to the origin.

 Isoquants are negatively sloped
 Isoquants having positively sloped segments
 A higher represents a larger output
 Two isoquants representing different output levels
 No two isoquants intersect or touch
each other
 No two isoquants intersect one another
 Isoquants are convex to the origin
 Convexity of an isoquant
Isocosts
 Various combinations
of i/p that may be
purchased for given
amt of exp.
 Isocosts is ratio of
change of capital to
labour.
 Line close to origin
indicates lower cost
outlay.
Max o/p for a given cost
 AIM

 Why Iso-quants & Iso-cost line ?

 Position of the Producer.

 Conditions for least cost comb.

 Slope of IQ - MRTS

 Slope of IC – Price factor

Minimisation of cost for given
level of o/p
 AIM
 Position of the
Producer.
 Condition for
equilibrium same.
 MRTS = factor price
ratio
 Limitations

 Merely describes i/p substitution method but

does’nt explain it.
 Exp. may summarize but unable to explain
shape or posn.
 Limited to 2 or 3 i/p’s.
 Uninformative about new i/p’s.