Isocost, Least Cost Combination

1
Dr.K.Baranidharan

• Present by

2
Engineering Economics Financial Accounting

• ISOCOSTLEAST COST COMBINATION

3
INDEX

• ISOCOSTS
• LEAST-COST COMBINATION OF INPUTS 

4
ISOCOSTS

• Isocosts refer to the cost curve that represents
  the combination of inputs that will cost a
  producer the same amount of money.
• Isocosts denotes IQ2a particular level of total
  cost for a given level of production.
• The level of production changes, the total cost
  changes and, thus the isocosts curve moves upwards

5
The total cost as represented by each cost curve,
is calculated by multiplying the quantity of each
input factor with its respective price.

• The three download sloping straight line cost
  curves (assuming that the input prices are fixed,
  no quantity discount are available) each costing
  Rs.1.0 lakh, Rs.1.5 lakh and Rs.2.0 lakh for the
  output leavels of 20,000-30,000 and 40,000 units.

IC1.0
IC1.5
capital
IC2.0
Labour
6
Least-Cost Combination

• A manufacturer has to produce at a lower cost to
  attain a higher profit
• Isocosts and isoquants can be used to determine
  the input usage that minimizes the cost of
  production

7

• The slope of an isoquant is equal to that of an
  isocost is the place of the point of cost of
  production.

8
Dr.K.BaranidharanThank you

• K YOU

9
THANK YOU!!