Isoquants or Equal Product Curves

Isoquant literally means equal quantity or the same amount of output. The Isoquant is a locus of points showing that different combinations of factor-inputs give the same quantity of output. The Isoquant is also called Equal Product Curve.

Let us consider an Isoquant schedule. An Isoquant schedule shows that different combinations of factor inputs give same quantity of output.

Factor CombinationUnits of Factor XUnits of Factor YQuantity of Output
A1920 units
B2620 units
C3420 units
D4320 units

Let us plot the graph with factor X shown on the X-axis and factor Y on the Y-axis. Plotting the factor combinations; viz. points A, B, C and D respectively and joining these points we get the curve. This is an Isoquant representing 20 units of output.

Isoquants or Equal Product Curves

Thus different points on the same Isoquant curve show that different factor combinations can be used to yield the same quantity of output. Therefore Isoquant curve is also called the equal-product curve.

Thus an Isoquant is a curve any point on which shows that various combinations of factor inputs yield the same level of output. At this stage it may be noted that as the Isoquant represents the level of output and as output is physically quantifiable the Isoquant must be labeled not only as just IQ but must represent the quantity produced e.g. 20q. The Isoquant thus labeled as 20q shows all possible combinations of factors that yield 20 units of output at any point on that curve.

Marginal Rate of Technical Substitution

Since with different factor-combinations we are able to produce same quantity of output it necessarily implies that factors of production are substitutes to each other; for if factor-inputs were not substitutes then we would not have obtained the same level of output. Thus the Isoquant implies factor substitutability. The factors need not be perfect substitutes but they do possess an element of substitutability e.g. if 1x+9y can produce 20q and 2x+6y can also produce 20q, then it implies that 3 units of input Y are substituted by 1 unit of input X, so as to yield the same level of output.

The rate at which one factor-input is substituted by the other is called the Rate of Technical Substitution. To obtain the Marginal Rate of Technical Substitution (MRTS) we try to find out as to how many units of input Y are substituted by one additional unit of factor input X. combination A of 1X + 9Y yields 20q ; and combination B of 2X + 6Y also yields the same quantity of output viz. 20q, one unit of factor X can displace 3 units of factor Y. hence the MRTS is 3:1


Factor CombinationUnits of Factor X Units of Factor Y MRTS = ˆ†Y/ ˆ†X
A 19—-
B 263:1
C 342:1
D 431:1

It is important to note that the MRTS goes on diminishing. This gives rise to the Principle of Diminishing Marginal Rate of Technical Substitution.

Properties of Isoquants

  1. An Isoquant must slope downward from left to right. The logic behind this is the principle of diminishing marginal rate of technical substitution. In order to maintain a given output, a reduction in the use of one input must be offset by an increase in the use of another input.
  2. Isoquant must be convex to the point of origin. This is because of the operation of the principle of diminishing marginal rate of technical substitution. MRTS is the rate at which marginal unit of an input can be substituted for another input making the level of output remain the same.
  3. No two Isoquants should intersect each other. Just as two indifference curves cannot cut each other, two isoquants also cannot cur each other. If they intersect each other, there would be a contradiction and we will get inconsistent results.
  4. Isoquants need not be parallel. The shape of an isoquant depends upon the marginal rate of technical substitution. Since the rate of substitution between two factors need not necessarily be the same in all the isoquant schedules, they need not be parallel.

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