Production of goods requires
resources or inputs. These inputs are called factors of
production named as land, labor, capital and organization.
The short run is a period of time in
which only one input (say labor) is allowed to vary while other
inputs land and capital are held fixed. In the short run,
therefore, production can be increased with one variable factor
and other factors remaining constant.
The long run is the lengthy
period of time during with all inputs can be varied. There are
no fixed output in the long run. All factors of
production are variable inputs.
The word 'iso' is of Greek origin
and means equal or same and 'quant' means quantity. An
isoquant may be defined as a curve showing all the various
combinations of two factors that can produce a given level of
The main properties of the isoquants are similar to those
of indifference curves. These properties are now discussed in
A firm can produce a given level of
output using efficiently different combinations of two inputs.
For choosing efficient combination of the inputs, the producer
selects that combination of factors which has the lower cost of
Prof. R.G.D. Alien and J.R. Hicks
introduced the concept of MRS (marginal
rate of substitution) in the
theory of demand. The similar concept is used in the
explanation of producers equilibrium and is named as
marginal rate of technical substitution (MRTS).
In the long run,
all factors of production can be varied. The profit maximization
firm will choose the least cost combination of factors to
produce at any given level of output. The least cost
combination or the optimum factor combination refers to the
combination of factors with which a firm can produce a specific
quantity of output at the lowest possible cost.