Page 224 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-10: Isoquant Curve

increasing of labour. From Fig. 10.16 it is clear that the difference between EF is greater than FG and the Notes
difference between FG is greater than GH. Means,

EF > FG > GH

It means that to increase 100 units of production can be got by labour in decreasing order. Suppose that
EF is 20 units of labour and FG is 10 units of labour. Then, from E to F, other 100 units of production can
be occurred by 20 extra units of labour. From F to G, other 100 units of production can be occurred by
10 extra units of labour. Thus the production path RP indicates that when production increases then the
marginal production of labour increases.
2. Diminishing Returns to a Factor: Diminishing Returns to a Factor is the situation where the total
production increases in decreasing rate by increasing the numbers in variable factors. Figure 10.17
indicates the diminishing returns to a factor. When capital is stable in RP and production increases
by using only extra units of labour then the differences between iso-product curves make larger
means to produce 100 alternative units, more labour is required. It means the marginal production
of labour is decreased. The difference between EF is less than FG and the difference between FG is
less than GH. Means,

EF < FG < GH

Fig. 10.17

Y
Diminishing Returns to a Factor
IQ IQ IQ
1 2 3 IQ 4
EF < FG < GH
Capital R E F G H P

300 400
Short period 200
O expansion path 100 X
Labour

Give your opinion on Expansion Path.

It means that to increase 100 units of production can occur by increasing labour alternatively. The extra
100 units of production between E and F can be obtained by using 10 extra units of labour. The extra 100
units of production between F and G can be obtained by using 20 extra units of labour. The production
path RP shows that when labour increases then the marginal production of labour decreases.
3. Constant Returns to a Factor: Constant Returns to a Factor is the situation where the total production
increases in constant rate by using extra units of variable factors. Figure 10.18 shows constant returns
to a factor. When capital is stable in OR and production is increased by using extra units of labour

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