managerial economics
DESCRIPTION
Isoquant and IsocostTRANSCRIPT
PRODUCTION THEORYPRODUCTION FUNCTIONS WITH TWO VARIABLE
INPUTS
Reported by: Nino Reiner F. Badiola
PLM MBA 6
Managerial EconomicsDr. Carlos Manapat
DISCUSSION
• Isoquant Curves• Marginal Rate of Technical Substitution
(MRTS)• Isocost Lines• Least Cost Combination
PRODUCTION ISOQUANTS
• The term Isoquant derived from Iso, meaning Equal, and Quant, from Quantity.
• Curves showing all possible combination of inputs that yield the same output.
• Locus of points showing that different combinations of factor-inputs give the same quantity of output.
• Equal Product Curve
INPUT COMBINATION
PRODUCTION ISOQUANT
EFFICIENT COMBINATION
MARGINAL RATE OF TECHNICAL SUBSTITUTION (MRTS)
• The rate at which one input may be substituted for another input in the production process, while total output remains constants.
• Amount of one input factor that must be substituted for one unit of another input factor to maintain a constant level of output.
• Algebraically,MRTS = ΔY / ΔX
MRTS
ISOCOST LINES
COST MINIMIZATION SUBJECT TO AN OUTPUT CONSTRAINTS
OUTPUT MAXIMIZATION SUBJECT TO A COST CONSTRAINTS
Thank you!