What does the slope of the isocost line equal?
The slope of an iso-cost line is equal to the slope of an isoquant since the slope of an isoquant tells the firm how much capital is needed to replace a unit of labor to maintain the output while the slope of an iso-cost line shows the relative price of the inputs.
What does the slope of the ISO cost curve represent?
The exact slope of the isoquant curve on the graph shows the rate at which a given input, either labor or capital, can be substituted for the other while keeping the same output level.
Is isocost line negatively slope?
In general, the slope of the isocost line is negative of the given input price.
What are Isoquants and Isocosts?
An isoquant shows all combination of factors that produce a certain output. An isocost show all combinations of factors that cost the same amount. Isocosts and isoquants can show the optimal combination of factors of production to produce the maximum output at minimum cost.
When the slope of the isocost is equal to the slope of the isoquant it represents what?
The essential condition is that the slope of the isocost line must equal the slope of the isoquant. Thus at a point of equilibrium marginal physical productivities of the two factors must be equal the ratio of their prices.
When MC is falling MC is?
It means that as long as MC curve is below the AC curve, AC will fall even if MC is rising. As per Table 6.8, when we move from 2 units to 3 units, MC rises and AC falls. It happens because during this range, MC is less than AC.
What are Isocosts and isoquants?
What is isocost microeconomics?
The isocost line represents the total cost C as constant for all K-L combinations satisfying the equation. “An isocost line shows the different combinations of factors of production that can be employed with a given total cost.”
Why does isoquant slope downward?
The isoquants slope downward because both labour and capital have positive marginal products. More of either input increases output; so if output is to be kept constant as more of one input is used, less of other input must be used.