Isoquanta is an indicative chart

Isoquant is a graph that is a curve showing various combinations of costs in a constant volume of product production. This phenomenon is also called characteristic lines of equal output.

Value

Isoquant is a graph that allows you to understand how to get the highest profit while preserving the volume of production. This involves combining different types of costs. Various levels of costs are considered. The positive slope of the graph indicates a direct link between the increase in different costs. A negative curve shows that with a decrease in certain costs, others will inevitably increase. Let us give one more definition. If we take into account that the main sphere of application of this concept is production, isoquantum - the curve of constant product release. All points on this graph reflect a different combination of certain factors of production to create the same number of products.

Map

If we pay attention to the theory of production functions, we can say that isoquantum is a geometric reflection of resources in space. Such a graph shows how a different combination of production resources gives the same amount of output. Isoquanta is a curve that can not intersect with a similar one. Each next line, which is located beyond the origin of the coordinates, shows a large amount of output, compared to the previous one. A set of similar schemes creates an isoquant map. The marginal rate of replacement of a certain resource by another falls when moving along the graph.

Example

The isoquantum is a line that can be convex with respect to the origin. Let's consider an example. The farmer is able to produce fifty tons of grain thanks to five combines and 5 employees. There is another option to obtain a similar result. You can use four combines and ten workers. An isoquant with a downward right inclination indicates the possibility of replacing one factor of production with another. The graph may look like an indifference curve. The point at which the isoquants and isocostes converge reflects a combination of factors in which a certain number of products are produced at minimal cost.

Types

The graphic display described by us determines the combination of interchangeability and complementarity of resources. With perfect substitution, the isoquantum is linearized. In the case of a strict complementarity of resources, the graph is a point.

Detailed definition

We have already described how isoquants and isocostes interact, but it is important to clarify a few more details for a more thorough acquaintance with the phenomenon described. For greater simplicity of the conducted analysis it is necessary to assume that the production technology during the considered period is not subject to change. Factors within certain limits can be interchangeable. The investigated production schedule is associated with two factors: capital and labor.

Thus, we are dealing with the particular case of the Cobb-Douglas function. There are several combinations of labor and capital that provide a given volume within the established boundaries. For clarity, let's first postpone the horizontal axis of labor indicators. On the vertical we will designate the capital. Further, we indicate the points at which the company produces an equal volume of output. As a result, we will get a curve. It should be called isoquanta. Each point of the graph corresponds to a certain combination of resources. At it the company produces the established volume of production.

Thus, the isoquant map is a set of curves that characterizes a certain production function. The phenomenon described is not a collection of discrete points. Isoquanta is a continuous function. For each specific volume of output, it is possible to construct its own curve. Such a schedule is able to reflect different combinations of resources. All of them provide the manufacturer with an equal volume of production. The isoquantum lacks areas of increase. The marginal rate of replacement of one resource by another reflects the degree of substitution by labor finance with an unchanged output volume. In any part of the isoquantum, the reflected index of technological substitution is equal to the tangent of the angle with respect to the slope of the tangent to the curve at the indicated point. Obviously, the level of substitution of labor for capital is not constant when moving along the schedule. When moving down the curve, the absolute values decrease. In this case, large volumes of labor should be used to compensate for the reduction in capital expenditure. Further, MRTS is expressed in its limiting value. The isoquantum, in turn, acquires a horizontal appearance. A further reduction in costs will lead to a reduction in output.