Page 225 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes then the differences between iso-production curves are equal, so to get 10 extra units of production,
similar quantity of labour is required. It means that the marginal production of labour is stable. The
differences between various iso-production curves are equal. It means,

EF = FG = GH

Fig. 10.18

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

400
300
Short period 200
expansion path 100
O X
Labour

It shows that 100 units of production can be increased by using similar number of extra units of labour.

10.15 Summary

• The downward slope of an iso-production curve is due to substitution of factors. The factors of
production are substitutes of each other. So to produce similar quantity of production, if one factor
is used in low quantity then another can be used in high quantity. Due to this, the slope of iso-
production curve is downward.

10.16 Keywords

• Substitute: Options
• Producer: Person who produce
• Iso product: Similar production
• Principle: Law

10.17 Review Questions

1. What is Isoquant curve? Explain it.
2. What do you mean by iso-cost line?
3. What is subsitutional theory? Describe it.
4. What is Production Path? Describe it.

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