Derivation of smooth convex isoquant, Managerial Economics

It is presumed that every of the different combinations of capital and labour displayed in Table produces the same level of output, which is, 20 units. Combinations are such that if one factor is increased other factor is decreased or vice versa. All these combinations are technically efficient.

Table: Various Combinations of Labour and Capital to Produce 20 Units of Output

Factor Combination

Labour

Capital

A

1

15

B

2

11

C

3

8

D

4

6

If we plot all these combinations as well as join them we get a curve Q. This is displayed in Figure below. 

239_DERIVATION OF SMOOTH CONVEX ISOQUANT.png

Figure: Isoquant or Equal Product Curve

Curve Q is the isoquant or equal product curve. It displays all those combinations of capital and labour that, with a given technology, produce 20 units of output. So an isoquant is locus of all those sublimations of capital andlabour that yield the same level of output. Or we can say that an isoquant comprises all the technically efficient methods of producing a given level of output.

Posted Date: 8/10/2013 4:03:50 AM | Location : United States







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