Isoquant is an indicative graph.

Anonim

An isoquant is a graph that represents a curve representing various combinations of costs under conditions of a constant volume of product production. This phenomenon is also called the characteristic lines of equal release.

Value

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Isoquant is a graph that allows you to understand how to get the highest profit while saving production. In this case, it is assumed to combine various types of costs. Consideration of different levels of costs. The positive slope of the graph indicates a direct relationship between the increase in various costs. The negative curve shows that if certain costs are reduced, others will inevitably increase. Let us give one more definition. If we take into account that the main field of application of this concept is production, the isoquant is the curve of constant product release. All points on such a graph reflect a different combination of certain factors of production to create the same number of goods.

Map

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If we pay attention to the theory of production functions, we can say that an isoquant is a geometric reflection of resources in space. Such a graph shows how a different combination of production resources gives the same amount of output. An isoquant is a curve that cannot intersect with a similar self. Each next line, which is located below the beginning of the coordinates, shows a greater value of the release, compared with the previous one. The combination of such schemes creates an isoquant map. The marginal rate of replacement of a specific resource by another falls as you move along the graph.

Example

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An isoquant is a line that can be convex with respect to the origin. Consider an example. The farmer is able to produce fifty tons of grain thanks to five combines and 5 employees. There is another option for obtaining a similar result. Four combines and ten workers can be used. An isoquant with a downward right slope indicates the possibility of replacing one factor of production with another. The graph may look like an indifference curve. The point at which isoquants and isocosta converge reflects a combination of factors in which a certain number of products will be produced with minimal cost.

Types

The graphic display we describe defines a combination of interchangeability and complementarity of resources. With perfect substitution, the isoquant gets a linear look. In the case of tight complementarity of resources, the graph is a point.

Detailed Definition

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We have already described how isoquants and isocosta interact, but it is important to clarify a few more details for a more thorough acquaintance with the described phenomenon. For greater ease of analysis, it should be assumed that the production technology during the period under review is not subject to change. Factors within certain limits can be interchanged. The production schedule studied is associated with two factors: capital and labor.

Thus, this is a special case of the Cobb-Douglas function. There are several combinations of labor and capital that provide a given amount within established limits. For clarity, let's first set aside labor rates on the horizontal axis. On the vertical we denote the capital. Next, we indicate the points at which the company produces an equal volume of products. As a result, we get a curve. That it should be called isoquantum. Each point of the chart corresponds to a specific combination of resources. With her, the company produces an established volume of production.

Thus, an isoquant map is a set of curves that characterizes a specific production function. The described phenomenon is not a collection of discrete points. Isoquant is a continuous function. For each specific volume of output it is possible to build its own curve. Such a schedule is able to reflect different combinations of resources. All of them provide for the manufacturer an equal volume of production. The isoquant has no areas of ascending. The marginal rate of replacing one resource with another reflects the degree of substitution by labor finance with a constant volume of output. At any part of the isoquant, the reflected rate of technological substitution is equal to the tangent of the angle with respect to the slope of the tangent to the curve at the specified point. Obviously, the level of substitution of labor for capital is not constant when moving along the chart. When moving down the curve, the absolute figures decrease. In this case, ever-increasing amounts of labor should be used to offset the reduction in capital expenditures. In the future, MRTS is expressed in its limit value. The isoquant, in turn, acquires a horizontal view. Further cost reductions will lead to a reduction in output.

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