Question

List out the properties of iso-quants with the help of diagrams.

Answer 1

Iso-quant:
“An Iso-quant is a curve showing all possible combinations of inputs physically capable of producing a given level of output” – Ferguson.

Properties of Iso-quant curve:

• The Iso-quant curve has negative slope:

1. It slopes downwards from left to right indicating that the factors are substitutable.
2. In the diagram combination, A refers to more of capital K₅ and less of labour L₂
   
3. As the producer moves to B, C, and D more labour and less capital are used.

• Convex to the origin:

1. In production, the capital substituted by 1 unit of labour goes on decreasing. It is called the diminishing marginal rate of technical substitution.
2. If the marginal rate of technical substitution diminishes the Iso-quants will be convex to the origin.
3. Constant MRTS (straight line) and increasing MRTS (concave).

• Non-inter-section of Iso-Quant curves:

1. Point A lie on the Iso-quants IQ₁ and IQ₂
2. But the point C shows a higher output and point B shows a lower level of output IQ₁
3. If C = A, B = A, then C – B. But C > B which is illogical.

• An upper Iso-quant curve represents a higher level of output:

1. Higher IQ_s show higher outputs and lower IQ_s show lower output.
2. The arrow in the figure shows an increase in the output with a right and upward shift of an Iso-quant curve.

• The iso-quant curve does not touch either X-axis or Y-axis:
  No Iso-quant curve touches the X-axis or Y-axis because, in IQ, only capital is used and in IQ₂ only labour is used.