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Isoquant Is Convex To The Origin

1) Isoquants are convex to the origin because the marginal rate of technical substitution between inputs diminishes with more substitution, meaning the ratio of substituting capital for labor decreases. 2) Isoquants slope downward because producing the same output requires giving up some capital to increase labor. 3) Higher isoquants represent higher production levels because they combine more labor and capital, allowing for larger scale production.

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Vanshika Sharma
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908 views4 pages

Isoquant Is Convex To The Origin

1) Isoquants are convex to the origin because the marginal rate of technical substitution between inputs diminishes with more substitution, meaning the ratio of substituting capital for labor decreases. 2) Isoquants slope downward because producing the same output requires giving up some capital to increase labor. 3) Higher isoquants represent higher production levels because they combine more labor and capital, allowing for larger scale production.

Uploaded by

Vanshika Sharma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Isoquant is convex to the origin

The isoquant is convex to the origin because the marginal rate of technical substitution
(MRTS) between the inputs is diminishing. As shown in the tabular example of MRTS, the
ratio by which the input units of capital is substituted by labor units diminishes with more
and more substitution of labor for capital. Thus, the isoquant curve is convex to the origin.

If the isoquant curve had been concave to the origin, it would imply that the MRTS increases
as more and more of labor is substituted for capital. And this would be against the
assumption that the isoquant curve is based on.

Isoquant is negatively sloped


The isoquant curve is neither upward sloping nor horizontal but always slopes downward
from left to right. It is because the producer will have to give up some of the input units of
capital to increase the input of labor when keeping the production amount unchanged.
Increasing input units of either of the factors without deducing the input of the other factor
will result in increased production and it is beyond the principle of isoquant curve.
In the figure, when OK1 units of capital were employed, OL1 units of labor were employed
too. When the input units of labor was increased to OL 2, the input units of capital was
reduced to OK2.
Therefore, the curve is downward sloping from to right. And slope of any downward sloping
curve is always negative.

Higher isoquant represents higher production


The isoquant which is in higher stage has higher units of labor and capital combinations.
Greater combination of labor and capital makes large scale of production. So, higher the
isoquant curve, greater will be the production level.
In the figure, we can see that there are two isoquant curves (Iq 1 and Iq2). We can also see
that the combination A lies on Iq1 and combination B lies on Iq2.
Combination A consists of OL1 units of labor and OK1 units of capital which is visibly lesser
than the OL2 units of labor and OK2 units of capital at point B. So we can say that production
level at Iq2 is higher than the production level at Iq 1.
Two isoquants never intersect each other
Each isoquant curve is a representation of particular level of production. The level of
production or output of a production process is same throughout the curve.
In the above figure, Iq1 and Iq2 are two isoquant curves and R is the point where both the
curves intersect.
According to the principle of isoquant curve, production level at point S = production level at
point R = production level at point T

Also, production level at point P = production level at point R = production level at point Q

But, production level at point S and point T ≠ production level at point P and point Q

Therefore, two isoquant curves cannot intersect. Yet, two isoquant curves need not be
parallel to each other.

The parallelism of isoquant curves depend upon the MRTS. The isoquant curves can be
parallel only when the MRTS of both the curves are equal.

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