Hello Friends, in today’s article we are going to know about Properties of Isoquants (Properties of Isoquants in Economics). So let’s discuss in details.
Table of Contents
What is isoquant curve?
An isoquant is a curve that shows all the combinations of two inputs that give same level of output. It is also known as equal production curve or production indifference curve.
Properties of Isoquants in Economics
The Properties of Isoquants are explained in the following grounds –
• Iso-quants are slope downward from left to right – We know that points on isoquants give or yield the same amount of output. When we increase the amount of one factor of production, the amount of others factor of production has to be decreased.
This is so because when the quantity of labour (factor) is increased, shown on the diagram (1), the quantity of capital (factor) must be reduced so as to keep output constant.
• Iso-quants are convex to the origin – The convexity of iso-quants is due to the diminishing marginal rate of technical substitution (MRTS).
If the isoquants are concave to the origin, it would mean that the MRTS increased as more and more of a factor capital (K) was replaced by factor labour (L).
This could be valid if the law of increasing returns applied. But in practical world, the principle of diminishing MRTS generally hold good and it makes the equal product curves convex to the origin.
• Two isoquants never cut each other – As like as indifference curve, two isoquants also can not cut each other. In figure (3) points A and B lie on the same isoquant IQ2.
Both the points represent same level of output. Similarly IQ1, showing the equal amount of output. Both the isoquant IQ1 and IQ2 represent two levels of output.
But they intersects each other at point A. Then combination A = B and A = C. Therefore, B must be equal to C, but it is impossible.
• Higher isoquants represents higher level of output – An isoquant lying on the right indicates larger amount of output. That is on the higher isoquant we have either more units of one factor of production or more units of both factors.
• No isoquants can touch either axis – If an isoquant touches X axis, it mean that the product is being produced with the help of labour only and if it touch Y axis, it means that production perform only capital without labour. It is shown by figure (5).
• Isoquants need not be parallel to each other – All the isoquants curves in a isoquant map are not parallel, because the rate of substitution in different isoquant schedules need not be necessarily equal. It is shown in the following figure.
In figure (6), it is found that the isoquants IQ1 and IQ2 are parallel but isoquants IQ3 and IQ4 are not parallel to each other.
• Each isoquants is oval shaped – It means that at some point it begins to retreat from each axis. This shape is a result of the fact that if a producer uses more of capital or more of labour or more of both than is necessary, the total product will eventually decline.
It is shown in the following figure (7). The isoquants curves helps the firm to delineate the boundary lines for the economic region of production. In the figure, IQ1, IQ2 and IQ3 are the three isoquants.
All of them bend back upon themselves with positive sloped segments at both ends. IQ1 bends back at the point D and A. Likewise, IQ2 and IQ3 bend back at the point E, B and F, C respectively.
By joining together A, B and C will get OQ line. As like as we get OP by joining together the points D, E and F. In economics the line OP and OQ are known as Ridge lines.
Conclusion
So friends, this was the concept of Properties of Isoquants (Properties of Isoquants in Economics). Hope you get the full details about it and hope you like this article.
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Wow! I never thought I could understand the concept like that. Very simple explanation for easy comprehension. Thank you very much.
You are most welcome