Isoquants and Production under a Labor-Saving Technology Shift
From the definition of quasi-rents as the value of output minus the costs of non-factor input, it follows that
isoquants will have linear sections an production functions will be nonconcave.
For each element of set T, O [member of] R + n has
isoquants. Farrell (1957) discovered such
isoquants as efficient boundaries or frontiers in Eq.
For neoclassical economists, capital is just an input into the process of production (represented in their textbooks as one of the axes on a two-dimensional diagram of
isoquants or as one of the exogeneous variables in an aggregate production function).
Energy-efficient technologies are represented in this framework by a new set of
isoquants where, for any level of capital, a given level of thermal comfort is attained with less energy usage than under the older technology.
This section surveys Rothbard's analysis of
isoquants and isocosts in preparation for tracing out factor demand curves, and compares it with his later derivation of the factor demand curve, as well as his remarks on the causal influence of output prices on input prices.
We also graph the
isoquants for the liquidity-constrained high-default-cost household.
If the production function is q = 2L + 5K , then the associated
isoquants are:
All of the combinations of time and money result in the same performance makeup of what is called a performance
isoquant. Figure 1 illustrates this concept with two notional performance
isoquants.
The
isoquants or efficient boundaries of the sections of T can be defined in radial terms as follows (Farrell 1957).
La fonction de production, qui s'ecrit : P = f (K, L)6, est le point de depart vers des schematisations extremes : un monde oE ne s'interferent que des courbes (
Isoquants, iso couts)7.