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Isoquants – Meaning, Shape & Properties

In the long run, a firm can vary both labour and capital. The concept of isoquants helps to study different combinations of inputs that produce the same level of output.

1. Meaning of Isoquant

Isoquant (also called equal product curve) is a curve showing different combinations of two inputs (usually labour and capital) which give the same level of output.

Example: 100 units of output can be produced by:

  • 2 units of capital + 8 units of labour, or
  • 3 units of capital + 6 units of labour, or
  • 4 units of capital + 4 units of labour

All these points lie on the same isoquant.

Key Concept – Isoquant
Isoquant = "Equal output" curve. Each point represents one combination of inputs giving the same output level.

2. Isoquant Map

A set of isoquants representing different output levels is called an isoquant map.

  • Higher isoquant → higher level of output.
  • Lower isoquant → lower level of output.

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3. Shape of an Isoquant

Isoquants are generally downward sloping and convex to the origin.

Reason: When one input (labour) increases, the other (capital) can be reduced while keeping output constant, but not in equal proportion.

This gives rise to the concept of Marginal Rate of Technical Substitution (MRTS).

MRTS of labour for capital = amount of capital that can be reduced when one more unit of labour is used, keeping output constant.

MRTS diminishes as we move down along an isoquant.

4. Properties of Isoquants (Exam-Oriented)

1. Isoquants Slope Downwards from Left to Right

  • To maintain the same output, if labour increases, capital must decrease.
  • Therefore, isoquant has negative slope.

2. Isoquants are Convex to the Origin

  • Due to diminishing MRTS.
  • As labour increases, the firm is willing to sacrifice less and less capital for each extra unit of labour.

3. Higher Isoquant Represents Higher Output

  • IQ3 above IQ2 means more output.
  • Like indifference curves, but for output, not satisfaction.

4. Isoquants do Not Intersect

  • If two isoquants intersect, it would mean same combination of inputs gives two different levels of output, which is impossible.

5. Isoquants Need Not be Parallel

  • Distance between isoquants may vary, depending on the technology.

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5. Quick Revision Points

  • Isoquant = curve of equal output combinations of labour and capital.
  • Downward sloping, convex to origin.
  • Higher isoquant → higher output level.
  • Isoquants do not intersect.
  • Concept of MRTS explains convex shape.

6. Quiz Time 🎯

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