Concept of isocost, Managerial Economics

Assignment Help:

The concept of isocost

In the use of resources, firms are faced with opportunity cost.  For every addition of say capital, they must forego a unit of say labour.

Exposition:                                               

194_isocost.png

Suppose the firm pays:

W for L (labour)

r for k (capital)

If C is the Total Cost (TC), then

C = rk + WL.  So if C is given as c, then the producer can choose among various combinations e.g.

                        k = C - WL

                              r     r

Thus if he spends all the money on k then he shall be at A and if he spends all the money on L then he shall be at B.  At A he spends C while at B he shall also spend C.  The line joining A and B is called Isocost line and is defined as locus of all different combinations of factors the firm can purchase given a stipulated money outlay and factor prices.


Related Discussions:- Concept of isocost

Intended or planned investment, Intended or planned Investment Expendit...

Intended or planned Investment Expenditure on investment depends on business expectations on the chance of making profits and on the availability of funds for the purchase of p

Cost of unemployment, Cost of Unemployment Unemployment is a problem b...

Cost of Unemployment Unemployment is a problem because it imposes costs on society and the individual.  The cost of unemployment to a nation can be categorized under three hea

Actual income and full employment income, Actual income and Full employment...

Actual income and Full employment income Full employment income (Also called Potential National) is the national income that could be produced when the country's factors of pr

Concept of isocost, The concept of isocost In the use of resources, fi...

The concept of isocost In the use of resources, firms are faced with opportunity cost.  For every addition of say capital, they must forego a unit of say labour. Expositio

The international monetary fund, The International Monetary Fund The I...

The International Monetary Fund The International Monetary Fund is a kind of an embryo World Central Bank.  Its objectives are: i.    To work towards the full convertibilit

Expected utility, (Only for extra credit) Consider Freddy on a rainy Thursd...

(Only for extra credit) Consider Freddy on a rainy Thursday afternoon after losing in his favorite video game. His friend Tommy comes over to cheer him up and offers him the follow

What is the socially optimal market price, Consider a manufactured good who...

Consider a manufactured good whose production process generates pollution. The annual demand for the good is given by Qd=100-3P. The annual market supply is given by Qs=P. In both

Theories of the firm, Define Williamson''s Model of Managerial Discretion p...

Define Williamson''s Model of Managerial Discretion practice?

Explain cost output relationship, Explain cost output relationship with ref...

Explain cost output relationship with reference to: a.    Total fixed cost and output b.    Total variable cost  and output

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd