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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.

Assumptions:

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.

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