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# EEFA - ISOQUANT - FINAL YEAR CS/IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY - DR,K,BARANIDHARAN

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EEFA - ISOQUANT - FINAL YEAR CS/IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY - DR,K,BARANIDHARAN

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### EEFA - ISOQUANT - FINAL YEAR CS/IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY - DR,K,BARANIDHARAN

1. 1. Dr.K.Baranidharan Present by…
2. 2. Engineering Economics & Financial Accountingment EE&fa 2August 18, 2013
3. 3. ISOQUANTISOQUANT
4. 4. ISOQUANT- ISOCOST ANALYSISISOQUANT- ISOCOST ANALYSIS • Isoquant • A line indicating the level of inputs required to produce a given level of output • Iso- meaning - ‘Equal’ • -’Quant’ as in quantity • Isoquant – a line of equal quantity
5. 5. ISOQUANTSISOQUANTS • An isoquant curve shows variousAn isoquant curve shows various combinations of two input factors such ascombinations of two input factors such as capital and labour , which yield the samecapital and labour , which yield the same level of output.level of output. • An isoquant curve represent all suchAn isoquant curve represent all such combinations which yield equal quantity ofcombinations which yield equal quantity of the output and any or every combination isthe output and any or every combination is a good combination of the manufacture.a good combination of the manufacture. • Since he prefers all these combinationSince he prefers all these combination equally, an isoquant curve is also calledequally, an isoquant curve is also called “product indifference curve”“product indifference curve”
6. 6. Units of K 40 20 10 6 4 Units of L 5 12 20 30 50 Point on diagram a b c d e a Units of labour (L) Unitsofcapital(K) An isoquant yielding output (TPP) of 5000 unitsAn isoquant yielding output (TPP) of 5000 units 0 5 10 15 20 25 30 35 40 45 0 5 10 15 20 25 30 35 40 45 50
7. 7. Units of K 40 20 10 6 4 Units of L 5 12 20 30 50 Point on diagram a b c d e a b Units of labour (L) Unitsofcapital(K) 0 5 10 15 20 25 30 35 40 45 0 5 10 15 20 25 30 35 40 45 50 An isoquant yielding output (TPP) of 5000 unitsAn isoquant yielding output (TPP) of 5000 units
8. 8. Units of K 40 20 10 6 4 Units of L 5 12 20 30 50 Point on diagram a b c d e a b c d e Units of labour (L) Unitsofcapital(K) 0 5 10 15 20 25 30 35 40 45 0 5 10 15 20 25 30 35 40 45 50 An isoquant yielding output (TPP) of 5000 unitsAn isoquant yielding output (TPP) of 5000 units
9. 9. Features of ISOQUANTSFeatures of ISOQUANTS • DOWNWARD SLOPING:DOWNWARD SLOPING: • An isoquant must slopeAn isoquant must slope downwoards from left to rightdownwoards from left to right • Which implies that using moreWhich implies that using more of one input to produce theof one input to produce the same level of output must implysame level of output must imply using less of the other inputsusing less of the other inputs
10. 10. • CONVEX TO ORIGIN:CONVEX TO ORIGIN: • Isoquants are convex to the orgine.Isoquants are convex to the orgine. • It is because the input factors are notIt is because the input factors are not perfect substitutes.perfect substitutes. • One input factor can be substituted byOne input factor can be substituted by another input factor in a “another input factor in a “diminishingdiminishing marginal ratemarginal rate”” • If the input factors were perfectIf the input factors were perfect substitutes, the isoquant would be asubstitutes, the isoquant would be a fallingfalling straight linestraight line..
11. 11. 0 5 10 15 20 25 30 35 0 10 20 30 40 50 Isoquant where input factors are perfect substitutesIsoquant where input factors are perfect substitutes Units of labour (L) Unitsofcapital(K) Assumptions TC = 200 000 TC = 300 000 TC = 400 000 TC = 500 000
12. 12. • When the input are used in a fixedWhen the input are used in a fixed proportion and substitution of oneproportion and substitution of one input for other cannot take place, theinput for other cannot take place, the isoquant will be L shaped.isoquant will be L shaped.
13. 13. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Isoquants where input are usedIsoquants where input are used in a fined proportionin a fined proportion Complementary inputs MRTS=0
14. 14. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. DO NOT INTERSECT: Two isoquants do not intersect. It is because each of these denote a particular level of output. If a manufacturer wants to operate at a higher level of output, he has to switch over to another isoquants with a higher level of output.
15. 15. 0 10 20 30 0 10 20 Q1 Q2 Q3 Q4 Q5 Unitsofcapital(K) Units of labour (L) An isoquant mapAn isoquant map
16. 16. • DOES NOT TOUCH AXES:DOES NOT TOUCH AXES: • The Isoquants touches neither xThe Isoquants touches neither x nor Y axis as both input arenor Y axis as both input are required to produce a givenrequired to produce a given productproduct
17. 17. Dr.K.Baranidharan THANK YOU