Tài liệu Isocost/Isoquant Analysis ppt

© 2003 McGraw-Hill Ryerson Limited
Isocost/Isoquant
Isocost/Isoquant
Analysis
Analysis
Chapter 10 Appendix
Chapter 10 Appendix
10A - 2
© 2003 McGraw-Hill Ryerson Limited
Isocost/Isoquant
Isocost/Isoquant
Analysis
Analysis
◆
In the long run, a firm can vary all of
the factors of production.
◆
One important decision in the long run
is which combination of factors to use?
◆
Economic efficiency involves choosing
the factors so that the cost of production
is at the minimum.
10A - 3
© 2003 McGraw-Hill Ryerson Limited
Isocost/Isoquant
Isocost/Isoquant
Analysis
Analysis
◆
A graphical tool used in economics

to analyze the long run choice of
factors of production is the
isocost/isoquant analysis.
10A - 4
© 2003 McGraw-Hill Ryerson Limited
The Isoquant Curve
The Isoquant Curve
◆
An isoquant curve (equal quantity)
represents combinations of factors
of production that result in equal
amounts of output.
10A - 5
© 2003 McGraw-Hill Ryerson Limited
The Isoquant Curve for
The Isoquant Curve for
60 Earrings,
60 Earrings,
Fig. A10-2, p 229
Fig. A10-2, p 229
Units of labour
Machines
B
A
G
C
D
F
E
(Q

60)
10A - 6
© 2003 McGraw-Hill Ryerson Limited
The Isoquant Curve
The Isoquant Curve
◆
The rate at which one factor must be
added to compensate for the loss of
another factor is called the marginal
rate of substitution.
◆
The slope of the isoquant curve is
the marginal rate of substitution.
10A - 7
© 2003 McGraw-Hill Ryerson Limited
The Isoquant Curve
The Isoquant Curve
◆
The slope of the isoquant curve:
Slope = MP
labour
/MP
machines
= MRS
10A - 8
© 2003 McGraw-Hill Ryerson Limited
The Isocost line
The Isocost line
◆
The isocost line (equal cost)

represents alternative combinations
of factors of production that have the
same cost.
◆
The slope of the isocost line equals
the ratio of prices of the factors of
production.
10A - 9
© 2003 McGraw-Hill Ryerson Limited
The Isocost Line
The Isocost Line
◆
The slope of the isocost curve:
Slope = P
labour
/P
machines
10A - 10
© 2003 McGraw-Hill Ryerson Limited
The Isocost Lines,
The Isocost Lines,
Fig. A10-4,
Fig. A10-4,
p230
p230
Units of labour
Machines
Slope = -P
labour
/P

machines
=-5/3
6 12
20
18
C
D A
10A - 11
© 2003 McGraw-Hill Ryerson Limited
Combining Isoquant
Combining Isoquant
and Isocost Curves,
and Isocost Curves,
Fig.
Fig.
A10-5, p 231
A10-5, p 231
Units of labour
Machines
20
12
C
AB
MP
labour
/Mp
machines
=P
labour
/P

machines
© 2003 McGraw-Hill Ryerson Limited
Isocost/Isoquant
Isocost/Isoquant
Analysis
Analysis
End of Chapter 10 Appendix
End of Chapter 10 Appendix