Figure 8A-1 An Isoquant
8A.1 Isoquants
The table in Figure 8A-1 illustrates a hypothetical example in which
several combinations of two inputs, labour and capital, can produce a
given quantity of output. The data from the table are plotted graphically
in Figure 8A-1. A smooth curve is drawn through the points to indicate
that there are additional ways, which are not listed in the table, of
producing the same output.
An isoquant describes the firm’s alternative methods for producing a
given level of output. Method a uses a great deal of capital (K) and very
little labour (L). As we move down the table, labour is substituted for
capital in such a way as to keep output constant. Finally, at the bottom,
most of the capital has been replaced by labour. The marginal rate of
substitution between the two factors is calculated in the last three
columns of the table. Note that as we move down the table, the marginal
rate of substitution declines.