Isoquants

An isoquant shows all combinations of two inputs that can produce the same level of output.

In the long run, both capital and labour are variable.

Where:

• K = Capital
• L = Labour

Properties of Isoquants

Higher Isoquants Represent Higher Output

Isoquants farther from the origin represent higher levels of output.

Isoquants Do Not Intersect

Two isoquants cannot intersect because each isoquant represents a different level of output.

Isoquants Slope Downward

An isoquant normally slopes downward because increasing one input requires decreasing the other input to maintain the same output.

Every Input Combination Has an Isoquant

There is an isoquant through every possible combination of inputs.

Convex Isoquants

Most isoquants are generally convex to the origin when the two inputs are imperfect substitutes.

For a convex isoquant, the MRTS is diminishing.

Perfectly Substitutable Inputs

When two inputs can substitute for each other at a constant rate:

• The isoquant is a straight line.
• MRTS is constant.
• Inputs can be substituted at a constant rate.

Perfectly Complementary Inputs

When inputs must be used in a specific ratio:

• The isoquant is right-angled.
• Efficient production occurs only at a specific input ratio.