Isoquant

An isoquant represents the set of all possible combinations of productive inputs that yield the same level of total output. Also known as production isoquants, these curves are a key concept in economic theory, particularly in the study of firm production. The term "isoquant" comes from the Greek "iso" (equal) and "quantity" (of output). In a two-input production function, an isoquant can be visualized on a Cartesian plane, where the x-axis represents the quantity of the first input (x₁) and the y-axis represents the quantity of the second input (x₂). Each point (x₁, x₂) on the plane corresponds to a specific input combination. An isoquant curve connects all such combinations that result in the same level of output (y), forming a continuous contour of equal production. This curve is known as the isoquant curve.

Each isoquant curve corresponds to a different level of production. Isoquants closer to the origin represent lower output levels, while those farther away indicate higher production levels. Like indifference curves in consumer theory, isoquant curves slope downward and are convex toward the origin, reflecting the principle that intermediate input combinations often lead to greater efficiency. Maintaining the same level of output while reducing one input requires increasing the other. The rate at which one input can be substituted for another while keeping output constant is called the marginal rate of technical substitution (MRTS). This rate is measured as the ratio of the change in one input (x₁) to the corresponding change in the other input (x₂), holding total output (y) constant.