Question

List out the properties of iso – quants with the help of diagrams?

Answer 1

Properties of Iso – quant Curve:

1. The iso – quant curve has negative slope:
It slopes downwards from left to right indicating that the factors are substitutable. If more of one factor is used, less of the other factor is needed for producing the same level of output.

In the diagram combination A refers to more of capital K₅ and less of labour L₂ As the producer moves to B, C, and D, more labour and less capital are used.

2. Convex to the origin.
This explains the concept of diminishing Marginal Rate of Technical Substitution (MRTS_LK). For example, the capital substituted by 1 unit of labour goes on decreasing when moved from top to bottom. If so, it is called diminishing MRTS. Constant MRTS (straight line) and increasing MRTS (concave) are also possible. It depends on the nature of iso – quant curve.

This means that factors of production are substitutable to each other. The capital substituted per unit of labour goes on decreasing when the iso – quant is convex to the origin.

3. Non inter – section of Iso – quant curves:
For instance, point A lie on the isoquants IQ₁ and IQ₂. But the point C shows a higher output and the point B shows a lower level of output IQ₁
If C = A, B = A, then C = B. But C > B which is illogical.

4. An upper iso – quant curve represents a higher level of output:
Higher IQ_S show higher outputs and lower IQ_S show lower outputs, for upper iso – quant curve implies the use of more factors than the lower isoquant curve.
The arrow in the figure shows an increase in the output with a right and upward shift of an iso – quant curve.

5. 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 IQ₁ only capital is used, and in IQ₂ only labour is used.