Production Theory - Isoquants

Isoquants

An isoquant represents those combinations of inputs, which will be capable of producing an equal quantity of output; the producer would be indifferent between them. The isoquants are thus contour lines, which trace the loci of equal outputs. As the production remains the same on any point of this line, it is also called equal product curve. Let Q0 = f(L,K) be a production factor, where Q0 = A is a fixed level of production.

L = Labour

K = Capital

If three combinations of labour and capital A, B and C produces 10 units of product, then the isoquant will be like Figure 1.

Here we see that the combination of L1 labour and K3 capital can produce 10 units of product, which is A on the isoquant. Now to increase the labour keeping the production the same the organization has to decrease capital. In Figure 1 B is the point where capital decreases to K2, while labour increases to L2. Similarly, 10 units of product may be produced at point C on the isoquant with capital K1 and labour L3. Each of the factor combinations A, B and C produces the same level of output, 10 units.