301 Isocost & Isoquant

Congratulations! You made it past chapter 2! I believe it was a challenging chapter and if you managed to understand it fully, good on you! If you have not, it is not too late. Go back and view the videos again. Feel free to email us at quickienomics@gmail.com if you have any burning questions to get off your chest. We will do our utmost best to help you understand and beat that that chapter to the ground!

We now move on to chapter 3, Behavior of the firm.

Essentially, this chapter is very similar to chapter 2 so if you already have a good grasp on consumer theory, you will find no problem with this chapter.

A consumer focuses mainly on utility maximization while a firm focuses on cost minimization and depending on the market structure which we will talk about in chapter 4, maximize profits.

Introducing the concept of the expansion path, this would enable us to understand why production is always cheaper in the long run than in the short run. This is also where we fully understand the meaning of being productively efficient using graphical means.

At the end of this video, you should be able to:

  • Draw the Isocost and Isoquant as well as indicate all important notations.
  • Understand the difference in cost of production in the long run and short run as well as the reasons for cost differences.
  • Understand what happens when the Long Run Expansion Path meets the Short Run Expansion Path




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6 Comments

  1. cherry92202 says:

    Hi! I think you have uploaded the wrong video for this topic? This video is for 302 right?

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  5. Becky says:

    Youve been a life saver in many many topics 🙂 thanks to you ive managed to get closer to the understanding of stuff that really couldnt get into my lazy brain 😛

    I have a question though:

    Im trying to solve and economic exercise.
    It goes : Paperon Dollars enterprise produces chewingums (Y). These are produced with arabic gum (G) and sugar (Z) in fixed proportions. every chewingum requires 1 unit of suger and 2 units of arabic gum.
    Then it asks for the production function and a generic isoquant.

    I normally would have put the production function as F(Z,G)= min [2Z, 1G]
    and then to find the isoquant i would have put that into a system together with 2Z=G so Z=1/2 G

    Although when i looked at the solutions of the exercise i found this:
    Y=g(Z,G)=min [Z,1/2 G]

    So how is that both a production function and a generic isoquant?
    I mean as far as i know the generic production function should be the one i put.
    Do i have to substitute the results of the expantion path in the production function to get both the isoquant and the production function?