The isocost line is an important component when analysing producer’s behaviour. The isocost line illustrates all the possible combinations of two factors that can be used at given costs and for a given producer’s budget. In simple words, an isocost line represents a combination of inputs which all cost the same amount.
Now suppose that a producer has a total budget of Rs 120 and and for producing a certain level of output, he has to spend this amount on 2 factors A and B. Price of factors A and B are Rs 15 and Rs. 10 respectively.
| Combinations | Units of Capital | Units of Labour | Total expenditure |
| | Price = 150Rs | Price = 100 Rs | ( in Rupees) |
| A | 8 | 0 | 120 |
| B | 6 | 3 | 120 |
| C | 4 | 6 | 120 |
| D | 2 | 9 | 120 |
| E | 0 | 12 | 120 |
The isocost line shows all the possible combinations of two factors Labour and capital.
15 comments:
how can i use the same method to produce a product?
When the price of an input falls,what will happen to the isocost?
when the price of one of the inputs falls the foot of the isocost will shift rightwards
I didn't understood the table given.
some mistakes are there in the table and also in text
There are no mistakes in the table.
KIndly double check.
How can the units of capital price =150
And units of price labour =100?????
there is mistake in the table the price is written 150&100 instead of 15&10 kindly correct that ................................................................................................................................................................................................................................................................................................................idiot blogger.
How effective is isocost in production desions
What is actual definition of iso cost line ?
Thanxs alote!!"
thanks
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Useful charts
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