Slope of an iso-quant, Microeconomics

Slope of an Iso-quant:

Since along an iso-quant the level of output remains the same, if θL units of θL are substituted for K units of K, the increase in output due to θ L units θ L (namely, θ L.MPL) should match the decrease in output due to a decrease of K units of K (namely θ K.MPK). In other words,  

1379_Slope of an Iso-quant.png

when  is a very small amount we can write 2323_Slope of an Iso-quant1.png. In the K - L input space, dK/dL represents the slope of the iso-quant at any point on it. 

θ Slope of the iso-quant 849_Slope of an Iso-quant2.png

The absolute value of dK/dL, denoted by |dK/dL| is known as the marginal rate of technical substitution of L for K. (MRTSLK). By definition, it measures the reduction in one input per unit increase in the other that is just sufficient to maintain a constant level of output. It is equal to the ratio of the marginal product of L to the marginal product of K.  

Posted Date: 10/26/2012 6:34:04 AM | Location : United States







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