SlideShare a Scribd company logo
PRESENTAION
                     ON
           FIRM’S EXPANSION PATH



PRESENTED BY:
 Pawan Kawan
   Roll No.- 15
     MBA-I
Concepts:
   In economics, an expansion path is a line
    connecting optimal input combinations as the
    scale of production expands.

   A producer seeking to produce the most units
    of a product in the cheapest possible way
    attempts to increase production along the
    expansion path.
   Economists Alfred Stonier and Douglas
    Hague defined expansion path as,” that line
    which reflects least cost method of producing
    different levels of output, when factors prices
    remains constant”.
The Firm’s Expansion Path
   The expansion path does not have to be
    a straight line.

   The expansion path does not have to be
    upward sloping.
Y
                       E
                                       Firm’s Expansion Path
              14
              13
              12
              11                       L                           Expansion Path
                       A
              10
              9
                       C
Capital (K)




              8                J
              7                                       I Optimal inputs combination

              6
              5                            H                           14Q
                                                                                  III
              4
                                   G                           M
              3                                   K                12Q
              2                                                          II
                                                            10Q
              1                                               I
                                                 D         B                  F
                                                                                        X
                  0
                           2       4       6     8        10      12   14
                                           Labour (L)
 At the points of tangency between
  isoquants and iso-cost lines, the slope of
  isoquant (MRTS) is equal to the slope of
  the iso-cost line.                 Where,
                                     w = wage rate of labour
 i.e. Slope of iso-cost line = -w/r r = rate of capital
       Slope of isoquant (MRTS) = -MPL/MPK
   Optimal inputs combination is:
         MPL       w
         MPK         r
    we get:
         MPL       MPK
           w        r
Conclusion
   Expansion path gives the least cost input
    combinations for every level of output.

   The point on an expansion path occur when
    iso-cost line and isoquant are tangent.

   At the points of tangency between isoquants
    and iso-cost lines, the slope of isoquant
    (MRTS) is equal to the slope of the iso-cost
    line.
THANK YOU

More Related Content

What's hot

Isoquants
IsoquantsIsoquants
Isoquants
MALVIKA AWASTHI
 
Economies of scale
Economies of scaleEconomies of scale
Economies of scale
Yuvaraj neelakandan
 
Price determination under perfect competition
Price determination under perfect competitionPrice determination under perfect competition
Price determination under perfect competition
Jithin Thomas
 
Revealed preference theory
Revealed preference theoryRevealed preference theory
Revealed preference theory
The Young Indian Economists
 
Law of returns to scale
Law of returns to scaleLaw of returns to scale
Law of returns to scale
jyyothees mv
 
COBB DOUGLAS PRODUCTION FUNCTION THEORY
COBB DOUGLAS PRODUCTION FUNCTION THEORYCOBB DOUGLAS PRODUCTION FUNCTION THEORY
COBB DOUGLAS PRODUCTION FUNCTION THEORYGourav Dholwal
 
Production function ppt in economics
Production function ppt in economicsProduction function ppt in economics
Production function ppt in economics
Mansi Tyagi
 
Cost Concepts
Cost ConceptsCost Concepts
Cost Concepts
AIT
 
Principles of managerial economics
Principles of managerial economicsPrinciples of managerial economics
Principles of managerial economics
Ryan Braganza
 
Elasticity of substitution
Elasticity of substitutionElasticity of substitution
Elasticity of substitution
Pabitra Mishra
 
Circular flow of Income
Circular flow of IncomeCircular flow of Income
Circular flow of Income
Aman Singh
 
National income
National incomeNational income
National income
Rarichan Mathew
 
Production Function
Production FunctionProduction Function
Production Function
GAURAV. H .TANDON
 
Costs functions
Costs functionsCosts functions
Costs functions
Dr. Shweta Uppadhyay
 
Cardinal utility analysis
Cardinal utility analysisCardinal utility analysis
Cardinal utility analysis
SIASDEECONOMICA
 
Distribution Theory.pptx
Distribution Theory.pptxDistribution Theory.pptx
Distribution Theory.pptx
Snehal Athawale
 
Production function
Production function Production function
Production function
Tej Kiran
 
Law of variable proportion
Law of variable proportionLaw of variable proportion
Law of variable proportion
Mukesh Kumar
 

What's hot (20)

Isoquants
IsoquantsIsoquants
Isoquants
 
Economies of scale
Economies of scaleEconomies of scale
Economies of scale
 
Price determination under perfect competition
Price determination under perfect competitionPrice determination under perfect competition
Price determination under perfect competition
 
Revealed preference theory
Revealed preference theoryRevealed preference theory
Revealed preference theory
 
Law of returns to scale
Law of returns to scaleLaw of returns to scale
Law of returns to scale
 
Production function
Production functionProduction function
Production function
 
COBB DOUGLAS PRODUCTION FUNCTION THEORY
COBB DOUGLAS PRODUCTION FUNCTION THEORYCOBB DOUGLAS PRODUCTION FUNCTION THEORY
COBB DOUGLAS PRODUCTION FUNCTION THEORY
 
Production function ppt in economics
Production function ppt in economicsProduction function ppt in economics
Production function ppt in economics
 
Cost Concepts
Cost ConceptsCost Concepts
Cost Concepts
 
Principles of managerial economics
Principles of managerial economicsPrinciples of managerial economics
Principles of managerial economics
 
Elasticity of substitution
Elasticity of substitutionElasticity of substitution
Elasticity of substitution
 
Circular flow of Income
Circular flow of IncomeCircular flow of Income
Circular flow of Income
 
National income
National incomeNational income
National income
 
Production Function
Production FunctionProduction Function
Production Function
 
Costs functions
Costs functionsCosts functions
Costs functions
 
Cardinal utility analysis
Cardinal utility analysisCardinal utility analysis
Cardinal utility analysis
 
Distribution Theory.pptx
Distribution Theory.pptxDistribution Theory.pptx
Distribution Theory.pptx
 
Production function
Production function Production function
Production function
 
Law of variable proportion
Law of variable proportionLaw of variable proportion
Law of variable proportion
 
Consumer surplus
Consumer surplusConsumer surplus
Consumer surplus
 

More from Pawan Kawan

Efficient market hypothesis
Efficient market hypothesisEfficient market hypothesis
Efficient market hypothesis
Pawan Kawan
 
Profile of Robert mondavi
Profile of Robert mondaviProfile of Robert mondavi
Profile of Robert mondavi
Pawan Kawan
 
Fredrick w. smith
Fredrick w. smithFredrick w. smith
Fredrick w. smith
Pawan Kawan
 
Distributed lag model
Distributed lag modelDistributed lag model
Distributed lag model
Pawan Kawan
 
Development of financial institutions in Nepal
Development of financial institutions in NepalDevelopment of financial institutions in Nepal
Development of financial institutions in Nepal
Pawan Kawan
 
Econometrics
EconometricsEconometrics
Econometrics
Pawan Kawan
 
Gross domestic product of nepal
Gross domestic product of nepalGross domestic product of nepal
Gross domestic product of nepal
Pawan Kawan
 
Operation management
Operation managementOperation management
Operation management
Pawan Kawan
 
Outsourcing
OutsourcingOutsourcing
Outsourcing
Pawan Kawan
 
The fixed exchange rate system
The fixed exchange rate systemThe fixed exchange rate system
The fixed exchange rate system
Pawan Kawan
 
Profitability of nepalese commercial bank
Profitability of nepalese commercial bankProfitability of nepalese commercial bank
Profitability of nepalese commercial bank
Pawan Kawan
 
Operation management
Operation managementOperation management
Operation management
Pawan Kawan
 
Hard rock cafe
Hard rock cafeHard rock cafe
Hard rock cafe
Pawan Kawan
 
Econometrics and business forecasting
Econometrics and business forecastingEconometrics and business forecasting
Econometrics and business forecasting
Pawan Kawan
 
Determination of interest rate
Determination of interest rateDetermination of interest rate
Determination of interest rate
Pawan Kawan
 
Asian financial crisis
Asian financial crisisAsian financial crisis
Asian financial crisis
Pawan Kawan
 
Internship report (nrb)
Internship report (nrb)Internship report (nrb)
Internship report (nrb)
Pawan Kawan
 
Three rules for making a company truly great
Three rules for making a company truly greatThree rules for making a company truly great
Three rules for making a company truly great
Pawan Kawan
 
Internship at nepal rastra bank ( nrb )
Internship at nepal rastra bank ( nrb )Internship at nepal rastra bank ( nrb )
Internship at nepal rastra bank ( nrb )
Pawan Kawan
 
Creating and managing bank service
Creating and managing bank serviceCreating and managing bank service
Creating and managing bank service
Pawan Kawan
 

More from Pawan Kawan (20)

Efficient market hypothesis
Efficient market hypothesisEfficient market hypothesis
Efficient market hypothesis
 
Profile of Robert mondavi
Profile of Robert mondaviProfile of Robert mondavi
Profile of Robert mondavi
 
Fredrick w. smith
Fredrick w. smithFredrick w. smith
Fredrick w. smith
 
Distributed lag model
Distributed lag modelDistributed lag model
Distributed lag model
 
Development of financial institutions in Nepal
Development of financial institutions in NepalDevelopment of financial institutions in Nepal
Development of financial institutions in Nepal
 
Econometrics
EconometricsEconometrics
Econometrics
 
Gross domestic product of nepal
Gross domestic product of nepalGross domestic product of nepal
Gross domestic product of nepal
 
Operation management
Operation managementOperation management
Operation management
 
Outsourcing
OutsourcingOutsourcing
Outsourcing
 
The fixed exchange rate system
The fixed exchange rate systemThe fixed exchange rate system
The fixed exchange rate system
 
Profitability of nepalese commercial bank
Profitability of nepalese commercial bankProfitability of nepalese commercial bank
Profitability of nepalese commercial bank
 
Operation management
Operation managementOperation management
Operation management
 
Hard rock cafe
Hard rock cafeHard rock cafe
Hard rock cafe
 
Econometrics and business forecasting
Econometrics and business forecastingEconometrics and business forecasting
Econometrics and business forecasting
 
Determination of interest rate
Determination of interest rateDetermination of interest rate
Determination of interest rate
 
Asian financial crisis
Asian financial crisisAsian financial crisis
Asian financial crisis
 
Internship report (nrb)
Internship report (nrb)Internship report (nrb)
Internship report (nrb)
 
Three rules for making a company truly great
Three rules for making a company truly greatThree rules for making a company truly great
Three rules for making a company truly great
 
Internship at nepal rastra bank ( nrb )
Internship at nepal rastra bank ( nrb )Internship at nepal rastra bank ( nrb )
Internship at nepal rastra bank ( nrb )
 
Creating and managing bank service
Creating and managing bank serviceCreating and managing bank service
Creating and managing bank service
 

Recently uploaded

How to Make a Field invisible in Odoo 17
How to Make a Field invisible in Odoo 17How to Make a Field invisible in Odoo 17
How to Make a Field invisible in Odoo 17
Celine George
 
Acetabularia Information For Class 9 .docx
Acetabularia Information For Class 9  .docxAcetabularia Information For Class 9  .docx
Acetabularia Information For Class 9 .docx
vaibhavrinwa19
 
The Diamond Necklace by Guy De Maupassant.pptx
The Diamond Necklace by Guy De Maupassant.pptxThe Diamond Necklace by Guy De Maupassant.pptx
The Diamond Necklace by Guy De Maupassant.pptx
DhatriParmar
 
TESDA TM1 REVIEWER FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...
TESDA TM1 REVIEWER  FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...TESDA TM1 REVIEWER  FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...
TESDA TM1 REVIEWER FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...
EugeneSaldivar
 
The basics of sentences session 5pptx.pptx
The basics of sentences session 5pptx.pptxThe basics of sentences session 5pptx.pptx
The basics of sentences session 5pptx.pptx
heathfieldcps1
 
Normal Labour/ Stages of Labour/ Mechanism of Labour
Normal Labour/ Stages of Labour/ Mechanism of LabourNormal Labour/ Stages of Labour/ Mechanism of Labour
Normal Labour/ Stages of Labour/ Mechanism of Labour
Wasim Ak
 
Language Across the Curriculm LAC B.Ed.
Language Across the  Curriculm LAC B.Ed.Language Across the  Curriculm LAC B.Ed.
Language Across the Curriculm LAC B.Ed.
Atul Kumar Singh
 
CACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdfCACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdf
camakaiclarkmusic
 
Biological Screening of Herbal Drugs in detailed.
Biological Screening of Herbal Drugs in detailed.Biological Screening of Herbal Drugs in detailed.
Biological Screening of Herbal Drugs in detailed.
Ashokrao Mane college of Pharmacy Peth-Vadgaon
 
The Accursed House by Émile Gaboriau.pptx
The Accursed House by Émile Gaboriau.pptxThe Accursed House by Émile Gaboriau.pptx
The Accursed House by Émile Gaboriau.pptx
DhatriParmar
 
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...
Levi Shapiro
 
Marketing internship report file for MBA
Marketing internship report file for MBAMarketing internship report file for MBA
Marketing internship report file for MBA
gb193092
 
Synthetic Fiber Construction in lab .pptx
Synthetic Fiber Construction in lab .pptxSynthetic Fiber Construction in lab .pptx
Synthetic Fiber Construction in lab .pptx
Pavel ( NSTU)
 
2024.06.01 Introducing a competency framework for languag learning materials ...
2024.06.01 Introducing a competency framework for languag learning materials ...2024.06.01 Introducing a competency framework for languag learning materials ...
2024.06.01 Introducing a competency framework for languag learning materials ...
Sandy Millin
 
Unit 2- Research Aptitude (UGC NET Paper I).pdf
Unit 2- Research Aptitude (UGC NET Paper I).pdfUnit 2- Research Aptitude (UGC NET Paper I).pdf
Unit 2- Research Aptitude (UGC NET Paper I).pdf
Thiyagu K
 
Supporting (UKRI) OA monographs at Salford.pptx
Supporting (UKRI) OA monographs at Salford.pptxSupporting (UKRI) OA monographs at Salford.pptx
Supporting (UKRI) OA monographs at Salford.pptx
Jisc
 
Model Attribute Check Company Auto Property
Model Attribute  Check Company Auto PropertyModel Attribute  Check Company Auto Property
Model Attribute Check Company Auto Property
Celine George
 
MASS MEDIA STUDIES-835-CLASS XI Resource Material.pdf
MASS MEDIA STUDIES-835-CLASS XI Resource Material.pdfMASS MEDIA STUDIES-835-CLASS XI Resource Material.pdf
MASS MEDIA STUDIES-835-CLASS XI Resource Material.pdf
goswamiyash170123
 
Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46
Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46
Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46
MysoreMuleSoftMeetup
 
Azure Interview Questions and Answers PDF By ScholarHat
Azure Interview Questions and Answers PDF By ScholarHatAzure Interview Questions and Answers PDF By ScholarHat
Azure Interview Questions and Answers PDF By ScholarHat
Scholarhat
 

Recently uploaded (20)

How to Make a Field invisible in Odoo 17
How to Make a Field invisible in Odoo 17How to Make a Field invisible in Odoo 17
How to Make a Field invisible in Odoo 17
 
Acetabularia Information For Class 9 .docx
Acetabularia Information For Class 9  .docxAcetabularia Information For Class 9  .docx
Acetabularia Information For Class 9 .docx
 
The Diamond Necklace by Guy De Maupassant.pptx
The Diamond Necklace by Guy De Maupassant.pptxThe Diamond Necklace by Guy De Maupassant.pptx
The Diamond Necklace by Guy De Maupassant.pptx
 
TESDA TM1 REVIEWER FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...
TESDA TM1 REVIEWER  FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...TESDA TM1 REVIEWER  FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...
TESDA TM1 REVIEWER FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...
 
The basics of sentences session 5pptx.pptx
The basics of sentences session 5pptx.pptxThe basics of sentences session 5pptx.pptx
The basics of sentences session 5pptx.pptx
 
Normal Labour/ Stages of Labour/ Mechanism of Labour
Normal Labour/ Stages of Labour/ Mechanism of LabourNormal Labour/ Stages of Labour/ Mechanism of Labour
Normal Labour/ Stages of Labour/ Mechanism of Labour
 
Language Across the Curriculm LAC B.Ed.
Language Across the  Curriculm LAC B.Ed.Language Across the  Curriculm LAC B.Ed.
Language Across the Curriculm LAC B.Ed.
 
CACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdfCACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdf
 
Biological Screening of Herbal Drugs in detailed.
Biological Screening of Herbal Drugs in detailed.Biological Screening of Herbal Drugs in detailed.
Biological Screening of Herbal Drugs in detailed.
 
The Accursed House by Émile Gaboriau.pptx
The Accursed House by Émile Gaboriau.pptxThe Accursed House by Émile Gaboriau.pptx
The Accursed House by Émile Gaboriau.pptx
 
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...
 
Marketing internship report file for MBA
Marketing internship report file for MBAMarketing internship report file for MBA
Marketing internship report file for MBA
 
Synthetic Fiber Construction in lab .pptx
Synthetic Fiber Construction in lab .pptxSynthetic Fiber Construction in lab .pptx
Synthetic Fiber Construction in lab .pptx
 
2024.06.01 Introducing a competency framework for languag learning materials ...
2024.06.01 Introducing a competency framework for languag learning materials ...2024.06.01 Introducing a competency framework for languag learning materials ...
2024.06.01 Introducing a competency framework for languag learning materials ...
 
Unit 2- Research Aptitude (UGC NET Paper I).pdf
Unit 2- Research Aptitude (UGC NET Paper I).pdfUnit 2- Research Aptitude (UGC NET Paper I).pdf
Unit 2- Research Aptitude (UGC NET Paper I).pdf
 
Supporting (UKRI) OA monographs at Salford.pptx
Supporting (UKRI) OA monographs at Salford.pptxSupporting (UKRI) OA monographs at Salford.pptx
Supporting (UKRI) OA monographs at Salford.pptx
 
Model Attribute Check Company Auto Property
Model Attribute  Check Company Auto PropertyModel Attribute  Check Company Auto Property
Model Attribute Check Company Auto Property
 
MASS MEDIA STUDIES-835-CLASS XI Resource Material.pdf
MASS MEDIA STUDIES-835-CLASS XI Resource Material.pdfMASS MEDIA STUDIES-835-CLASS XI Resource Material.pdf
MASS MEDIA STUDIES-835-CLASS XI Resource Material.pdf
 
Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46
Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46
Mule 4.6 & Java 17 Upgrade | MuleSoft Mysore Meetup #46
 
Azure Interview Questions and Answers PDF By ScholarHat
Azure Interview Questions and Answers PDF By ScholarHatAzure Interview Questions and Answers PDF By ScholarHat
Azure Interview Questions and Answers PDF By ScholarHat
 

Expansion path

  • 1. PRESENTAION ON FIRM’S EXPANSION PATH PRESENTED BY: Pawan Kawan Roll No.- 15 MBA-I
  • 2. Concepts:  In economics, an expansion path is a line connecting optimal input combinations as the scale of production expands.  A producer seeking to produce the most units of a product in the cheapest possible way attempts to increase production along the expansion path.
  • 3. Economists Alfred Stonier and Douglas Hague defined expansion path as,” that line which reflects least cost method of producing different levels of output, when factors prices remains constant”.
  • 4. The Firm’s Expansion Path  The expansion path does not have to be a straight line.  The expansion path does not have to be upward sloping.
  • 5. Y E Firm’s Expansion Path 14 13 12 11 L Expansion Path A 10 9 C Capital (K) 8 J 7 I Optimal inputs combination 6 5 H 14Q III 4 G M 3 K 12Q 2 II 10Q 1 I D B F X 0 2 4 6 8 10 12 14 Labour (L)
  • 6.  At the points of tangency between isoquants and iso-cost lines, the slope of isoquant (MRTS) is equal to the slope of the iso-cost line. Where, w = wage rate of labour  i.e. Slope of iso-cost line = -w/r r = rate of capital Slope of isoquant (MRTS) = -MPL/MPK  Optimal inputs combination is: MPL w MPK r we get: MPL MPK w r
  • 7. Conclusion  Expansion path gives the least cost input combinations for every level of output.  The point on an expansion path occur when iso-cost line and isoquant are tangent.  At the points of tangency between isoquants and iso-cost lines, the slope of isoquant (MRTS) is equal to the slope of the iso-cost line.