This document discusses production functions and isoquants. It defines a production function as a relationship between inputs like labor, capital, materials and time, and the output they produce. Isoquants represent combinations of two inputs that produce the same output amount. The key properties of isoquants are that they have a negative slope, are convex, do not intersect, and higher isoquants represent more output. The slope of the isoquant indicates the rate of technical substitution between inputs. The shape and spacing of isoquants can also show if a production process exhibits increasing, decreasing, or constant returns to scale.

2. Production function with 2
variable inputs return to scale

3. Production function
Isoquant and shape of isoquants
Return to scale
Properties of isoquant curves
Isoquants Map
Refrences
Thank you

4. WHAT IS PRODUCTION
FUNCTION
Production means transforming inputs
(labour, capital, raw materials, time
etc.)into an output. This concept of
production is however limited to only
‘manufacturing’.
In other words , a process by which men,
material, capital and time are converted
into value added product is called
production.

5. It is a mathematical presentation of
input output relationship.
The production function represent the
technology of a firm, of an industry or
the economy as a whole.
A production function may take the
form of a schedule or a table, a graphed
line or curve or a mathematical model.

6. A real life production function is generally very
complex. It includes a wide range of input
they are:-
Land and Building
Labour
Capital
Raw Material
Time
Technology
It is expressed by :-
Q = f(LB, L, K, M, T, t)

7. There is a relationship between
production and productivity.
Long-run production K& L are
variable.
Isoquants analyze and compare the
different combinations of K & L and
output

9. ISOQUANT
It is derived from Greek word iso, meaning
equal.
The isoquant mapping deals with the cost-minimization
problem of producers.
Adding one input while holding the other
constant eventually leads to decreasing
marginal output, and this is reflected in the
shape of the isoquant.

10. Isoquant are also called equal product
curves.
As with indifference curves, two isoquant
can never cross.
Every possible combination of inputs is on
isoquant.
An isoquant map can also indicate
decreasing or increasing returns to scale
based on increasing or decreasing distances
between the isoquant pairs of fixed output
increment, as output increases.

11. INPUT X
Q1
Q2
Q3
I
N
P
U
T
Y
An isoquant map where Q3>Q2>Q1. Typically inputs X and Y
would refer to labour and capital respectively. More of input X,
and Y, or both is required to move from isoquant Q1 to Q2, or
from Q2 to Q3.

12. Q1 Q2 Q3
I N P U T X
I
N
P
U
T
Y
Example of an isoquant map with two inputs that are substitute

14. Measuring the relationship between the scale (size) of a
firm and output
1) Increasing returns to scale: output
more than doubles when all inputs are
doubled
Larger output associated with lower cost
(autos)
One firm is more efficient than many
(utilities)
The isoquants get closer together

15. Increasing returns to scale
Labor (hours)
Capital
(machine
hours)
10
20
30
5 10
4
2
0
A

16. Measuring the relationship between the scale (size) of a
firm and output
2) Constant returns to scale: output
doubles when all inputs are doubled
Size does not affect productivity
May have a large number of producers
Isoquants are equidistant apart

17. Labor (hours)
Capital
(machine
hours)
Constant Returns:
Isoquants are
equally spaced
10
20
30
5 10 15
4
2
0
A
6

18. Measuring the relationship between the
scale (size) of a firm and output
3) Decreasing returns to scale: output less
than doubles when all inputs are doubled
Decreasing efficiency with large size
Reduction of entrepreneurial abilities
Isoquants become farther apart

19. Labor (hours)
Capital
(machine
hours)
Decreasing Returns:
Isoquants get further
apart
10
20
30
5 10
4
2
0
A

21. 1. Isoquants have a negative
slope- An isoquant has a negative slope in the
economic region and in the economic range of
isoquant.
The negative slope of isoquant implies substitutability
between the input. It means that if one of the input is
reduced, the other input has to be increased that the
total output remains unaffected.

22. 2. Isoquant are convex to origin-convexity
of isoquant implies two
things:
substitution between two inputs
Diminishing marginal rate of
technical substitution (MRTS)
The MRTS is defined as:
MRTS= -K-L= slope of the
isoquant

23. 3. Isoquant are non-intersecting
and non-tangential- The
intersection or tangency between
any two isoquant implies that a
given quantity of a commodity can
be produced with a smaller as well
as larger input-combination.

24. 4. Upper isoquant represent
higher level of output- Between
any two isoquant, the upper one
represent higher level of output
than the lower one. The reason is
upper isoquant has larger input
combination which in general
produce larger output.

25. QUANTITY L
Q2= 200
Q1= 100
Q
U
A
N
T
I
T
Y
K
B
C
D
A
X
Y
In this fig Q2 will always indicate high level of output than Q1. Q2 consist of more of
either capital or labour or both. Consider point a on Q1 and compare it with any point at
Q2. The point on Q2 consider more capital (a b). Point d more of labour (a d) and point
c more of both, capital and labour. Therefore Q2 represent higher level of output(200
units) than Q1 indicating 100 units.

27. 0
Q1
Q2
CAPITA
L
(K)
LABOUR (L)
An isoquant map is a
set of isoquant
presented on a two-dimensional
plane as
shown by isoquant Q1,
Q2, Q3.
Each isoquant shows
various combination
of two input that can
be used to produce a
given quantity of
output.
Q3