explains about ISO-quants ISO-costs,least combination and MRTS with example

1. Lakireddy Bali Reddy College of Engineering (Autonomous)
L.B. Reddy Nagar , Mylavaram – 521230. A.P.INDIA
Affiliated to JNTUK, Kakinada & Approved by AICTE, New Delhi
NAAC Accredited with “A” grade , Accredited by NBA New Delhi & Certified by ISO 9001 2008
School of Management Studies
www.lbrce.ac.in.bschoollbrce2011@gmail.com Phone: 08659-222933,Fax 08659-222931
Topic: Iso-quants ; Iso-costs ;Least combination; MRTS.
SUBMITTED TO:DR.V.V.NARSI REDDY.
PRESENTED BY:
JASIYA BEGUM(MBA)

2. CONTEXT:
• Iso-quants
• Iso-costs and least combination.
• MRTS

3. Iso-quants:
• The terms “Iso-quant” has been derived from the Greek
word ‘iso’ means ‘equal’ and Latin word ‘quantus’ means
‘quantity’. The iso-quant curve is therefore also known as
‘equal product curve’ or production indifference curve.
• Iso-quant shows all possible combinations of two inputs
which are capable of producing equal or a given level of
Output.

4. EXAMPLE:
Combination Capital Labour Output
A 1 10 50
B 2 7 50
C 3 4 50
D 4 3 50
E 5 1 50

5. Iso-quant curve:
C
A
P
I
T
A
L
L A B O U R
A
B
C
D

6. FEATURES:
It is a downward sloping cure
It is convex to origin
It does not intersect
It does not touch axis

7. Iso-cost:
 Iso-cost refers to the cost curve that represents the
combination of inputs that will cost the producer
the same amount of money.
 It is required to minimize the cost of output that it
produces.
 The isocost lines are straight lines
which represents the same cost with different input
combinations.

8. Iso-cost curve:
C
A
P
I
T
A
L
L A B O U R
K3
K2
K1
L1 L2 L3

9. OPTIMUM COMBINATION OF INPUTS:
 A profit maximizing firm seeks to minimize its cost for a
given output or to maximize the output for a given
total cost.
 A certain quantity of output can be produced with
different Input combinations.
 Optimum input combination is that which bears least
cost.
 Thus the input combination that results in the
minimum cost of production is to be found out. This is
known as least - cost input combination.

10. LEAST COST COMBINATION POINT:

11. Marginal Rate of Technical substitution (MRTS):
 MRTS is the rate at which marginal unit of an input can be
substituted for the marginal units of the other input so that the
level of output remains the same.
change in one input
MRTS =
Change in another input

12. COMBINATION QUANTITY OF GOOD
X
QUANTITY OF GOOD
Y
A 10 60
B 20 40
C 40 20
D 70 10
EXAMPLE:

13. CURVE: