Curvature of the iso-quant, Microeconomics

Curvature of the Iso-quant:

An iso-qunat is convex to the origin. This is so because as more and more units labour are employed, the producer would prefer to give up less and less of the other input to produce the same amount of output. This is shown in the following Figure:  

 

272_Curvature of the Iso-quant.png

For a rise in L from L1 to L2, the producer gives up K1 amount of K. For the same output level  q, as L increases from L3 to L4, she gives up K2 amount of K. As K2 < K1, it implies that for more units of L, the producer is willing to give up less of K. A convex iso-quant implies a diminishing MRTSLK. As   MRTSLK = MPi/MPk, a diminishing MRTS means as L increases, L MP  decreases and MPK increases.  

Posted Date: 10/26/2012 6:46:31 AM | Location : United States







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