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    Isoquant

    Uploaded by

    SaTish Kdka
    The document discusses isoquant analysis and its applications. It begins by constructing isoquants and showing different combinations of capital and labor that produce the same output. It then explains the concept of diminishing marginal rate of technical substitution. An isoquant map is presented showing multiple isoquants. The document discusses returns to scale and how isoquants change under conditions of increasing, decreasing, and constant returns. It also covers isocost lines and using isoquants and isocost lines to find the least-cost method of production. Finally, it demonstrates how to find the maximum output possible for a given total cost using isoquants and isocost lines.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd

    Isoquant

    Uploaded by

    SaTish Kdka
    286 views26 pages
    The document discusses isoquant analysis and its applications. It begins by constructing isoquants and showing different combinations of capital and labor that produce the same output. It then explains the concept of diminishing marginal rate of technical substitution. An isoquant map is presented showing multiple isoquants. The document discusses returns to scale and how isoquants change under conditions of increasing, decreasing, and constant returns. It also covers isocost lines and using isoquants and isocost lines to find the least-cost method of production. Finally, it demonstrates how to find the maximum output possible for a given total cost using isoquants and isocost lines.

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    Isoquant.ppt

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    The document discusses isoquant analysis and its applications. It begins by constructing isoquants and showing different combinations of capital and labor that produce the same output. It then explains the concept of diminishing marginal rate of technical substitution. An isoquant map is presented showing multiple isoquants. The document discusses returns to scale and how isoquants change under conditions of increasing, decreasing, and constant returns. It also covers isocost lines and using isoquants and isocost lines to find the least-cost method of production. Finally, it demonstrates how to find the maximum output possible for a given total cost using isoquants and isocost lines.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    286 views26 pages

    Isoquant

    Uploaded by

    SaTish Kdka
    The document discusses isoquant analysis and its applications. It begins by constructing isoquants and showing different combinations of capital and labor that produce the same output. It then explains the concept of diminishing marginal rate of technical substitution. An isoquant map is presented showing multiple isoquants. The document discusses returns to scale and how isoquants change under conditions of increasing, decreasing, and constant returns. It also covers isocost lines and using isoquants and isocost lines to find the least-cost method of production. Finally, it demonstrates how to find the maximum output possible for a given total cost using isoquants and isocost lines.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 26

    Kings College

    MBA 2015

    MBA 2015

    Isoquant analysis
    Constructing isoquants

    MBA 2015

    Units of capital (K)

    An isoquant
    Units
    of K
    40
    20
    10
    6
    4

    MBA 2015

    Units of labour (L)

    Units
    of L
    5
    12
    20
    30
    50

    Point on
    diagram
    a
    b
    c
    d
    e

    An isoquant

    45

    40

    Units
    of K
    40
    20
    10
    6
    4

    Units of capital (K)

    35
    30
    25

    Units
    of L
    5
    12
    20
    30
    50

    Point on
    diagram
    a
    b
    c
    d
    e

    20
    15
    10
    5
    0
    0

    10

    15

    20

    25
    MBA 2015 30

    Units of labour (L)

    35

    40

    45

    50

    An isoquant

    45

    40

    Units
    of K
    40
    20
    10
    6
    4

    Units of capital (K)

    35
    30
    25

    Units
    of L
    5
    12
    20
    30
    50

    Point on
    diagram
    a
    b
    c
    d
    e

    20
    15
    10
    5
    0
    0

    10

    15

    20

    25
    MBA 2015 30

    Units of labour (L)

    35

    40

    45

    50

    An isoquant

    45

    40

    Units
    of K
    40
    20
    10
    6
    4

    Units of capital (K)

    35
    30
    25

    Units
    of L
    5
    12
    20
    30
    50

    Point on
    diagram
    a
    b
    c
    d
    e

    20
    15

    10

    5
    0
    0

    10

    15

    20

    25
    MBA 2015 30

    Units of labour (L)

    35

    40

    45

    50

    Isoquant analysis
    Diminishing marginal
    rate of Technical substitution

    MBA 2015

    Diminishing marginal rate of


    Technical substitution
    Units of capital (K)

    g
    K = 2

    MRTS = 2

    MRTS = -K / L

    h
    L = -1

    isoquant

    MBA 2015

    Units of labour (L)

    Units of capital (K)

    g
    K = 2

    Diminishing marginal rate of


    Technical substitution
    MRTS = 2

    MRTS = -K / L

    h
    L = -1

    j
    K = 1

    MRTS = 1
    k

    L = -1

    isoquant

    MBA 2015

    Units of labour (L)

    Isoquant analysis
    An isoquant map

    MBA 2015

    10

    Units of capital (K)

    An isoquant map

    I5
    I1
    MBA 2015

    Units of labour (L)

    I2

    I3

    I4

    11

    Isoquant analysis
    Returns to scale

    MBA 2015

    12

    Constant returns to scale


    R
    Units of capital (K)

    600

    500

    400

    300
    200
    MBA 2015

    Units of labour (L)

    13

    Increasing returns to scale


    R
    Units of capital (K)

    c
    700
    b
    600
    500
    a

    400
    300
    200
    MBA 2015

    Units of labour (L)

    14

    Decreasing returns to scale


    R
    Units of capital (K)

    600

    400
    a
    300
    200
    MBA 2015

    Units of labour (L)

    15

    Isoquant analysis
    Isocost line

    MBA 2015

    16

    An isocost line
    Assumptions

    Units of capital (K)

    PK = Rs20 000
    W = Rs10 000
    TC = Rs300 000

    MBA 2015

    Units of labour (L)

    17

    An isocost line

    30

    Assumptions

    Units of capital (K)

    25

    PK = Rs20 000
    W = Rs10 000
    TC = Rs300 000

    20

    15

    10

    TC = Rs300 000
    d

    0
    0

    10

    15

    20

    MBA 2015

    25

    Units of labour (L)

    30

    35

    40

    18

    Isoquant analysis
    The least-cost
    method of production

    MBA 2015

    19

    Finding the least-cost method of


    Assumptions
    production
    Units of capital (K)

    PK = Rs20 000
    W = Rs10 000

    TC=Rs 200 000

    TC = Rs 300 000
    TC = Rs 400 000
    TC = Rs 500 000

    MBA 2015

    Units of labour (L)

    20

    Units of capital (K)

    Finding the least-cost method


    of production
    s

    TC = Rs 500 000

    TC = Rs 400 000

    MBA 2015

    Units of labour (L)

    Isoquant

    21

    Isoquant analysis
    The maximum output
    for a given cost

    MBA 2015

    22

    Units of capital (K)

    Finding the
    maximum output for
    a given total cost

    I5
    I4

    I1
    MBA 2015

    Units of labour (L)

    I2

    I3

    23

    Units of capital (K)

    Finding the
    maximum output
    for a given total
    cost
    Isocost

    I5
    I4

    I1
    MBA 2015

    Units of labour (L)

    I2

    I3

    24

    r
    Units of capital (K)

    Finding the
    maximum output
    for a given total
    cost

    I5
    I4

    v
    O

    I1
    MBA 2015

    Units of labour (L)

    I2

    I3

    25

    Finding the
    maximum output
    for a given total
    cost

    r
    Units of capital (K)

    K1

    I5
    I4

    v
    O

    I1
    L1

    MBA 2015

    Units of labour (L)

    I2

    I3

    26

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