Write short note on ‘isoquants’.

Write short note on ‘isoquants’.

Ans. An isoquant is defined as the locus of all those combinations of labour and capital which yield the same output. As an example, a cobbler having the minimum tools would hardly be able to complete one pair of shoes in a day while another cobbler of the same efficiency having a sewing machine and other useful tools could perhaps make two pairs of shoes in a single day. Here, the production function is given as –

X== f (L, K) … (i)

Function of equation (i) has three variables- output of commodity X (x), units of labour (L) and units of capital (K) .. For a given value of x, there will be alternative combinations of L and K. The alternative combinations of labour and capital for making different numbers of shoes per day are given in table 4.1.

      input output relationships

 

In this example, the entrepreneur could employ 1 cobbler and 20 units of Capital, 2 cobblers and 12 units of capital, 3 cobblers and 8 units of capital, or 6 cobblers and 3 units of capital to manufacture 2 pair of shoes. If he has to produce 5 pair of shoes, the alternative input combinations open to him are 2 cobblers and 20 units of capital, 3 cobblers and 14 unit of capital and so on. If we plot these alternative input combinations for a given output an assume a contniuous Vanuatu in the possible combinations of labour and capital, we can draw a curve called isoquant for the given units of output. The isoquants for various output levels of table 4.1 are depicted in fig. 4.1.

            isoquants

 

Family of isoquants or is-product curves makes up all the possible combinations of labour and capital which can be used to produce different outputs of a commodity. Hence, they are a geometric representation of a production function. The isoquants in fig. 4.1. denote the production function in our hypothetical shoe industry. Shape of these isoquants is such that-

(i) They are falling

(ii) The higher the is quant is, the higher the output it presents

(iii) They do not intersect each other

(iv) They are convex from below.

An is quant is falling, for it can neither be increasing nor constant. A rising or increasing isoquant

implies that output does not rise with increase in labour and capital, that is obviously not true. A horizontal or vertical isoquant means that output does not respond to variations in one of the input factors, others remaining constant. This is not true since generally output increases with an increase in any one factor of production, others remaining the same. For the same reasons, a higher isoquant denotes a higher

level of output.

An isoquant never intersects another isoquant, for if they did it would mean that with the same units of labour and capital, two different levels of output can be generated, that is absured. The isoquants are convex from below since substitution of labour for capital becomes more and more difficult as more of labour is substituted for capital. If labour and capital were perfect substitutes, isoquants would have been falling straight lines as in fig. 4.2.

 

 

isoquants when factors are perfect substitutes

On the other side, if one factor of production could not be substituted for another at all, isoquants would be  rectangular as depicted in fig. 4.3.

isoquants when factors are perfect non-substitutes

 

Because labour and capital are not perfect substitutes and their substitutability becomes more and more difficult as one factor is substituted for another, isoquants are convex from below. In addition to the above

properties of isoquants, it should be noted that they do not touch either the labour or the capital-

axis because both labour and capital are necessary for the production of any commodity.

 

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