Question

I need to write a forum on isocost line from a managers perspective in economics not less than 75 words. isocost line- a line that represents the combinations of inputs that will cost the producer the same amount of money. Also, give an example.

Answer 1

Answer : Isocost line means that different set of input has been used which can purchased with the same amount.

Isocost Equation :

C= wL+rK

w = wage rate

L = Number of labour employed

k = capital employed

r =rate of capital

Features of Isocost line :

• Isocost line shows that combination of different input has been utilised with the minimum cost. So that managers can earn maximum profit with minimum cost.
• Isocost line shows the amount of money can be spend on the different factors of production where production of output is maximum and cost is minimum.
• It helps in determining which combination of output produced maximum profit and minimum cost.

EXAMPLE : Suppose an organisation has $500 to spend on factor of production. There are labour and capital which are factors and their cost are different. The cost of employing 1 labour is $5 and capital is $2,

$500=$5L+$2K

The main motive of the managers is to maximise profit and making production at there best quality. So, the managers should always view their cost and factor of input has been employed in such a manner that they maximises the profit of the business.