The isoquants slope downward because both labour and capital have positive marginal products. More of either input increases output; so if output is to be kept constant as more of one input is used, less of other input must be used.
Why is an isoquant curve convex to the origin?
Property 2: An isoquant curve, because of the MRTS effect, is convex to its origin. This is because, at a higher curve, factors of production are more heavily employed. Either more capital or more labor input factors result in a greater level of production.
What are the assumptions of isoquant?
Assumptions of Isoquant Curve
- Only two inputs (labor and capital) are employed to produce a good.
- There is technical possibility of substituting one input for another.
- Labor and capital are divisible.
- The producer must be rational, i.e. trying to maximize his profit.
- State of technology is given and unchanged.
What is isoquants and its characteristics?
An isoquant shows alternative combinations of the two factors, each of which enables to produce a same quantity of output. Defining differently, an isoquant is the contour of all the combination of two factors that give rise to a same level of output.
Why can’t two isoquants cross?
Therefore, isoquants cannot intersect. An isoquant must always be convex to the origin. This is because of the operation of the principle of diminishing marginal rate of technical substitution. The MRTS diminishes because the two factors are not perfect substitutes.
What are the types of isoquant curve?
Linear Iso-quant Curve: This curve shows the perfect substitutability between the factors of production. Right Angle Iso-quant Curve: This is one of the types of iso-quant curves, where there is a strict complementarity with no substitution between the factors of production. …
What are the major differences between isoquant curve and indifference curve?
An isoquant is analogous to an indifference curve in more than one way. In it, two factors (capital and labour) replace two commodities of consumption. An isoquant shows equal level of product while an indifference curve shows equal level of satisfaction at all points.
Why does an isoquant slope downward from left to right?
(i) An Isoquant Slopes Downward from Left to Right: This implies that the Isoquant is a negatively sloped curve. This is because when the quantify of factor K (capital) is increased, the quantity of L (labor) must be reduced so as to keep the same level of output.
What are the properties of an isoquant curve?
The Properties of an Isoquant Curve. Property 1: An isoquant curve slopes downward, or is negatively sloped. This means that the same level of production only occurs when increasing units of input are offset with lesser units of another input factor.
Where does capital and labor go on an isoquant curve?
Most typically, an isoquant shows combinations of capital and labor, and the technological tradeoff between the two—how much capital would be required to replace a unit of labor at a certain production point to generate the same output. Labor is often placed along the X-axis of the isoquant graph, and capital along the Y-axis.
What happens when production Isoquants are straight lines?
When the production isoquants are straight lines, the MRTS is constant. This means that the rate at which capital and labour can be substituted for each other is the same whatever level of inputs is being used, as Fig. 6.7.
