Tài liệu Isocost/Isoquant Analysis ppt

◆ In the long run, a firm can vary all of the factors of production.. the factors so that the cost of production... Isocost/Isoquant Analysis ◆ A graphical tool used in economics to ana

Chapter 10 Appendix

◆ In the long run, a firm can vary all of the factors of production.

is which combination of factors to use?

the factors so that the cost of production

Isocost/Isoquant

Analysis

◆ A graphical tool used in economics

to analyze the long run choice of

factors of production is the

isocost/isoquant analysis.

The Isoquant Curve

◆ An isoquant curve (equal quantity)

represents combinations of factors

of production that result in equal

amounts of output.

The Isoquant Curve for

Units of labour

Machines

B

A

G

C

D

F E

(Q60)

The Isoquant Curve

◆ The rate at which one factor must be added to compensate for the loss of another factor is called the marginal rate of substitution.

◆ The slope of the isoquant curve is

the marginal rate of substitution.

The Isoquant Curve

◆ The slope of the isoquant curve:

Slope = MP labour /MP machines

= MRS

The Isocost line

◆ The isocost line (equal cost)

represents alternative combinations

of factors of production that have the same cost.

◆ The slope of the isocost line equals the ratio of prices of the factors of

production.

The Isocost Line

◆ The slope of the isocost curve:

Slope = P labour /P machines

Machines

Slope = -Plabour/Pmachines

=-5/3 20

C

Combining Isoquant

A10-5, p 231

Units of labour

Machines

20

12

C

A B

End of Chapter 10 Appendix