An isoquant is a firm’s counterpart of the consumer’s indifference curve. An isoquant is a curve that shows all the combinations of inputs that yield the same level of output. ‘Iso’ means equal and ‘quant’ means quantity. Therefore, an isoquant represents a constant quantity of output. The isoquant curve is also known as an “Equal Product Curve” or “Production Indifference Curve” or Iso-Product Curve.”
Slopes Downwards from Left to the Right:
An isoquant slopes downward from left to right or is negatively sloped, as can be seen from Figure-8.1. Such a shape implies that if a firm employs more of labour, it will employ less of capital or vice versa, in order to maintain the level of output.
Such a shape of isoquant also means that the marginal factor productivities are positive, that is more of a factor will make a positive contribution in production and less of other factor will make a negative contribution. To remain on the same isoquant or to maintain the same level of output, the positive and negative factor contributions should be equal.
The main assumptions of Iso-quant curves are as follows:
1. Two Factors of Production:
Only two factors are used to produce a commodity.
2. Divisible Factor:
Factors of production can be divided into small parts.
3. Constant Technique:
Technique of production is constant or is known before hand.
4. Possibility of Technical Substitution:
The substitution between the two factors is technically possible. That is, production function is of ‘variable proportion’ type rather than fixed proportion.
5. Efficient Combinations:
Under the given technique, factors of production can be used with maximum efficiency.