Production function with 2 variable inputs

Production function using 2 variable inputs is explained with the help of the Isoquants. Details about isoquants are explained below

In economics, an isoquant (derived from quantity and the Greek word iso [equal) and Latin word qunatus meaning ‘quantity’. The isoquant therefore called as the “Equal Product Curve” or can be named as the “indifference curve”

As isoquant curve can be defined as the locus of points representing various combinations of two inputs___ capital and labour__ yielding the same output.

In economics, an isoquant is a contour line drawn through the set of points at which the same quantity of output is produced while changing the quantities of two or more inputs.


— According to Ferguson, "An isoquant is a curve showing all possible combinations of inputs physically capable of producing a given level of output"

— In the words of Peterson, "An isoquant curve may be defined as a curve showing the possible combinations of two variable factors that can be used to produce the same total product"

The term Isoquant or Iso-product is composed of 'iso' implying equal and 'quant' implying quantity or product or output. Thus it means equal quantity or equal output. Different factors are needed to produce goods. These factors may be substituted for one another. For example 100 watches may be produced with 90 units of capital and 10 units of labour. The same number of watches (100 units) may also be produced with such combinations as 60 units of capital and 20 units of labour or with 40 units of capital and 30 units of labour. If different combinations of two factors yielding equal amount of total output are diagrammatically presented in the form of a curve, then such a curve is called on Isoquant or Iso-product curve. Thus isoquant curve is that curve which shows the different possible combinations of two factor inputs yielding the same amount of output. Isoquant curves are also known as Equal product or Iso-product or Production Indifference Curves. Isoquant curve is called production indifference curve since it is an extension of indifference curve analysis from the theory of consumption to the theory of production.An isoquant shows that if the firm have ability to substitute between the two different inputs (labour and machines) in order to produce the same level of output

If the distance between isoquants increases (curve shifting upward) output increases. Example q 1000 to q 1500 shift in the curve shows increase in the quantity produced where q = quantity produced.

By the isoquant curve we came to know that if we want to produce certain quantity of good (q=1000) ie 1000 goods, we can employee more labour and we can use less machinery. In the same way for the same output that is (q=1000) we can use more number of machinery and we can employee less number of labour in the firm for production of same quantity. Here according to the budget and the financial position of the firm the producer can switch between the alternative production systems.

Eg: for producing 1000 goods we can use 60 machines and 20 labours. OR we can use 20 machines and 60 labours for same production.

Linear isoquants

This liner isoquant is drawn if there is a perfect substitutability in the inputs of production. For example

Power plant equipped to burn either oil or gas, various amounts of electric power can be produced by burning gas only or oil only. Gas and oil are perfect substitutes here. Hence isoquants are straight lines.