This document summarizes key concepts in microeconomics including: - Production functions relate quantities of inputs to output - Isoquants represent combinations of inputs that produce the same output level - Marginal rate of technical substitution is the rate at which one input can be substituted for another without changing output - Economic regions of production define where isoquants have positive or negative sloping segments - Isocost lines show combinations of inputs that can be purchased with a given budget - Firms seek to produce at the optimal, least-cost combination of inputs given prices and production possibilities - Expansion paths illustrate how firms adjust input mixes as output increases at minimum cost.

1. MODY UNIVERSITY SCHOOL SCIENCE AND TECHNOLOGY
SCHOOL OF MANAGEMENT AND SCIENCE
MICROECONOMICS
Submitted To- Submitted by-
Mr. Kshitiz Jangir. Group 9

2. Content
1. Production function
2. Iso-quant and it’s properties
3. Marginal rate of technical substitution (MRTS)
4. The Economic Region of Production
5. Iso-cost line
6. Optimum Factor Combination
7. Expansion path

3. Production function
• Production is transformation of physical inputs into physical output. Output is thus a function of input.
• The functional relationship between physical inputs and physical output of a form is known as production
function.
• Algebraically, production function can be written as q = (a, b, c, d....), where you new star for quantity of
output a,b,c,d respectively, the unspecified relationship between quantity of output and qualities of factor is
donated there by the letter f.
• Production function express the relationship between the quantity of output and the quantity of various
inputs used for the production.
• Production function takes a maximum quantity of output that can be produced from any given quantity of
various inputs state in minimum quantity of various inputs that are required to yeild a given quantity of
output.

4. Iso-quant
• Also called equal-product curve, which is similar to indifference curve of consumer
behaviour.
• An iso-quant represents all those input combinations which are capable of producing the
same level of output.
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5. Iso-quant Map
• Also called equal-product map, which is similar to indifference curve map.
• Set of isoquant curves that shows different combinations of inputs that can
produce different levels of output.

6. General properties of isoquants
1. Downward sloping Or negative sloping- This is because when the quantity of factor k (capital) is
increased, the quantity of L (labour) must be reduced so as to keep the same level of output and vice-versa.
2. Convex to the origin- Because of the diminishing marginal rate of technical substitution.
3. Higher level of Isoquant present higher level of production.
4. Never intersect each other- As it is not possible that the same factor of combination which can produce x
units of output according to one Isoquant can also produce y units of output according to other Isoquant.
5. Never touches x and y axis- As the firm cannot produce a commodity with one factor alone.
6. IQ curve can be a downward sloping straight line as well as it can be a L shaped curve
also.
7. IQ curve represents ratio of Marginal Productivities if two factors of production

7. Marginal rate of technical substitution (MRTS)
• MRTS is the theory of production, which is similar to the concept of marginal rate of
substitution in the indifference curve and analysis of consumer’s demand.
• MRTS indicates the rate at which factor can be substituted at the margin without alternating
the level of output.
• For example MRTS of labour for capital may be defined as the number of units of capital
which can be replaced by one unit of labour so that the level of output remaining
unchanged.

8. Economic region of production
• It is important to know the region in which the optimal factor combined combination will
lie, as the firm will produce only on those combination of factors of which marginal
product of factor are diminishing but positive, as there are region in a production function
where isoquants may have positively sloped segments that are bent backwards in which a
rational producer will never produce as if marginal product is negative.
• Ridge lines are locus of points of isoquants where marginal product of one of the factor is
zero.

10. Iso-cost Line
Important problem faced by an entrepreneur is to decide about the particular combination of factor
which should be employed for producing a product. It is assumed that the entrepreneur aims at
maximizing his profit and will seek to minimise his cost for producing a given output.The choice of
a particular combination of factor by an entrepreneur depends upon (a) technical possibilities of
production, and (b) the prices of factors used for the production of particular product, technical
possibilities of production are represented by isoquant map and the prices of factors used for
production of a particular product is represented by isocost line.
• An isocost line shows various combination of two factors that the firm can buy with the given
outlay.
• The iso cost lines plays an important part in determining what combination of factors the firm
should choose for production.

11. Optimum Combination of factors
If the entrepreneur has already decided about the level of output to be produced then the
question arising is with which factor combination the entrepreneur will try to produce the
given level of output, obviously a producer will try to produce a given level of output with least
cost combination of factors which will be optimum for him..

12. Expansion path
Expansion path will show how the entrepreneur will change his factor combination as he
expands his output given the factor prices. Since expansion path represents minimum cost
combination for various levels of output, it shows the cheapest way of producing each output
given the relative prices of factors.

13. THANK YOU 😊