Cost Minimization by Isoquant Curve

An isoquant line is a line which is drawn through the set of locus, where same quantity of output is produced while changing the quantities of two or more inputs.

So from the definition, we can say that the characteristic of isoquant curve is similar to indifference curve.

More the distance of isoquant curve from origin increase, more the output increase. The slope of an isoquant curve is denoted as MPL / MPc. By using the concept of isoquant curve, any factory can decrease their production cost.

From the above mentioned graph, we can see that a factory can get same level of output at point ‘A’ and point ‘B’ as both are situated at O0 isoquant line. But in point ‘A’, the factory invested more capital, less labour and in point ‘B’, less capital more labour.

Example: Many automobile factories in Germany, use robot instead of labour. For implementing robot, they invest more capital and use less labour. By doing this, they can keep their output same.

Disclaimer: Definition was taken from ‘Wikipedia’.