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Unit-10: Isoquant Curve

capital and zero units of labour, while point D indicates ten units of labour and zero units of capital. Notes
Point B indicates four units of capital and two units of labour while point C indicates four units of
labour and three units of capital.
The sloping of iso-cost line is the average of pricing. To represent labour on axis OX and capital on OY,
the sloping of any iso-cost line would be following—

______________
Slope of iso-cost Line = Cost of Labour
Cost of Capital

(Note: The cost of labour represents the cost of capital and the cost of capital represents the cost of
labour.)

10.8 Difference between Isoquant Curves and Indifference Curves

The utilization of Isoquant curves in production theory is similar to indifference curves in demand
theory. After studying the Isoquant curves, we reach to the point that these curves are similar to
indifference curves but there are some differences between these two curves—
(1) An indifference curve represents the combinations of two products which give equal satisfaction.
Apart from this, Isoquant curve represents various combinations of two factors by which a firm
gets equal production.
(2) The Isoquant curve indicates the equal level of production which can be measured. The
indifference curve represents the equal level of satisfaction which cannot be measured.
(3) The Isoquant curve represents the combinations of variable things while the indifference curve
represents the combination of products.
(4) The Isoquant curve gives the knowledge of economical and uneconomical region of production.
The indifference curve does not give the knowledge of economical and uneconomical region of
consumption.
(5) The slop of an Isoquant curve fluctuates by the technical possibility between the factors of
production. This depends upon the marginal rate of technical substitution (MRTS), while the
slope of an indifference curve depends upon the MRS of two consumptive products from
consumer.
Watson has given true conclusion as, “Isoquant curves do indeed look like indifferent curves. Their
geometric properties are similar. Their economic analysis is parallel. But one great difference separates
them. Indifference curves are subjective. What goes on in consumer’s mind has been assumed. In
contrast Isoquant curves are objective, they can be measured in practice as well as in principle.”

10.9 Producer’s Equilibrium or Least Cost Combination of Factors

The producer’s equilibrium refers to a situation in which a producer maximizes his profits. In other
words, a producer produces a constant quantity of product with the help of minimum combination of
cost and factor. To use this minimum cost combination is also called optimum combination.
Optimum or minimum cost combination is the combination in which—
(i) The production which is got from fixed level of factors is maximum or
(ii) The cost is minimum for production in fixed level

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