Isoquant analysis :The Economically Efficient Point of Production

The least cost combination of inputs for a given output occurs where the isocost curve is tangent to the isoquant curve for that output.
This point can be found where the slopes of the theisoquant curve and isoquant line are equal. And this is equal at the point of tangency.

• The tangency point of Isoquant Map and isocost line gives us the equilibrium position E.
• Isoquant map intersects the isocost line at 3 points x , E and Z
. x and z lie on the lower isoquant curve than E lies on and hence gives lesser utility than E. So, E is the economically Efficient Point of Production

1 comment:

Lucky said...

why talk about utility in context of isoquants???they only talk about output level without giving utility 2 anybody.