Isoquant

Also known as: Isoproduct curve

An isoquant represents all possible combinations of the Factors of production represents which can be produced with a certain amount of goods. Points that are not on the isoquant are a sign of inefficiency.

Isoquant

Definition / explanation

Isoquants indicate all possible combinations of production factors, whereby a constant output is always generated. This means that every point on the isoquant denotes the same output quantity.

Die Darstellung einer Isoquante zeigt demnach auf, in welcher produktiven Beziehung Input und Output zueinander stehen. Die Produktionsfaktoren können jedoch substituierbar (das heißt austauschbar) oder limitational (nicht austauschbar) sein, was consequences für das Aussehen der Isoquante hat:

Let us assume that a company has two interchangeable production factors. Accordingly, a lower use of production factor 1 can be compensated for by a higher use of production factor 2 and vice versa in order to achieve the same output quantity.

In this case, the isoquant is convex. In the case of limitational factors, the isoquant is right-angled, whereby only the corner point represents efficient production (e.g. the use of more machine operators does not lead to the same output if fewer machines are used at the same time). The mixing ratio of the factor inputs can therefore not be changed (lack of substitutability).

Slope of the isoquants

Efficient isoquants have a negative slope (i.e. they are falling). The slope expresses the so-called marginal rate of technical substitution: It indicates the number of additional units of one factor must be used if the other factor is reduced by one unit (for constant output). That implies that ...

1.) bei austauschbaren Produktionsfaktoren eine Erhöhung des einen eine reduction des anderen nach sich zieht (Wert auf der y-Achse fällt, Wert auf der x-Achse steigt)

2.) a higher output can be realized by using more of both production factors.

The further the isoquant is from the origin of the diagram, the greater the amount of goods produced.

Summary

  • the isoquant represents the combination of inputs of two production factors with constant output
  • runs downwards and reflects efficient production as a geometric line
  • is right-angled for non-interchangeable production factors, otherwise convex to the origin
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