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Isoquants and its properties
The document discusses production functions and isoquants. It defines production, fixed and variable inputs, short run and long run periods. Isoquants represent combinations of two inputs that produce the same output level. Isoquants have specific properties - they are negatively sloped, convex to the origin, and do not intersect. Isocost lines show combinations of inputs that can be purchased for a given cost. Producers aim to maximize output for a given cost or minimize cost for a given output level by equating marginal rate of technical substitution to factor price ratios.
Isoquants and its properties
- 1. Group members PankajSingh Aatif Ahmed Mujahid Sayed Wahid Khan Samina Mirkar Ramakrishnan Iyer
- 2. Isoquants and itsProperties. Contents:- Production & Production function. Isoquants. Types of isoquants. Properties of isoquants. Isocosts & equilibrium of producers.
- 3. Production What isproduction? according to production manager according to economist
- 4. Production Function Therelationship between the inputs to the production process and the resulting output is described by a production function. P(A)= f(L,K)
- 5. Fixed Inputs AFixed 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.
- 6. Variable Inputs Variableinput 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.
- 7. Short Run Shortrun 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.
- 8. Long Run Longrun refers to that period of time in which all inputs are variable. Example- Installation of additional machine and employing more workers.
- 9. What are Isoquants?An isoquant is the locus of all the combinations of two factors of production that yield the same level of output.
- 10. Isoquant Table showingcombinations of Labour and Capital Producing 100 units of X 2 9 6 3 6 5 4 4 4 5 3 3 7 2 2 10 1 1 Units of Capital Units of Labour Processes
- 11. Convex isoquant 42 L 7 4 2 4 K Y X O
- 12. Types of IsoquantsLinear Isoquant Input- Output Isoquant
- 13. Linear Isoquant Acase of a perfect substitutability of production factors Isoquants shapes of a straight line sloping downwards from left to right O X Y Y
- 14. Input- Output IsoquantHere 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 X Y
- 15. Isoquant Map Outputvaries as the factor input change. Nearer the point of origin lower the production. Complete set of isoquants for the producers O X Y
- 16. Isoquants nearer tothe point of origin represent relatively lower level of production.
- 17. Assumptions:- There areonly two factors or inputs of production. Divisible into small units. Technical conditions.
- 18. Characteristics or Propertiesof 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.
- 19. Isoquants are negativelysloped Isoquants having positively sloped segments
- 20. A higher representsa larger output Two isoquants representing different output levels
- 21. No two isoquantsintersect or touch each other No two isoquants intersect one another
- 22. Isoquants are convexto the origin Convexity of an isoquant
- 23. Isocosts Various combinationsof 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.
- 24. Max o/p fora 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
- 25. Minimisation of costfor given level of o/p AIM Position of the Producer. Condition for equilibrium same. MRTS = factor price ratio
- 26. Limitations Merely describesi/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.
- 27.