Q. Explain about Concave Isoquant?

If the isoquant is concave to origin it would mean that marginal rate of technical substitution is increasing. This behaviour is explained in Figure.

Figure: Concave Isoquant

It is apparent from the Figure that as labour is increased at a constant rate, amount of capital given up (ΔK) goes on increasing. Such behaviour is irrational and so isoquants aren't concave to the origin.

Posted Date: 8/12/2013 1:50:40 AM | Location : United States

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