Economics Essay Example | Topics and Well Written Essays - 1500 words - 28

Economics - Essay ExampleAn isocost line is a line showing combinations of inputs that would output the same cost. in that locationfore, the word isocost implies that the cost of the given factors of production are constant along the certain ope symmetryn level and thus can be use for the planning and decision making purposes.In the above figure, L denotes the amount of labor apply by the maturater and K denotes the amount of capital utilized by the producer. It is evident from the figure that along the line the cost of both of the factors of production is same and the total cost of production is in any case shown on the chart for antithetical cost lines. With the help of isocost lines, most economic and cost beneficial decision can be made for getting the desired output. This graph also shows that isocost lines are the straight lines and the only different in them is that they shift up or down the graph showing the same pattern for different activity levels. These isocost li nes are parallel because each reflects the same relative resource price.Given aproduction function, an isoquant is the locus of input combinations that yield the same output level. (Chiang, p. 360) There is an isoquant set for each possible output level. Mathematically the isoquant is alevel curve of the production function.Isoquants is a concept relating to the quantity of input required to produce a certain level of output. For a given level of output, there are certain levels of input of production factors that yield the same level of output. If the ratio of two or more of the factors of production is changed then the resulting yield of those input factors can be same for all of the combinations of factors. This implies that the concept of isoquant deals primarily with the cost minimisation problems of producers.The above figure shows different levels of labor and capital required to produce a certain output of a particular product and the curve shows that different combinations of input resources can be made to