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Prepare a list of assumptions of isoquant.

Prepare a list of assumptions of isoquant.

Solution

Iso-quant analysis rests on a few key assumptions:

  1. Two inputs, one output: only two inputs, labour (L) and capital (K), are used to produce a single commodity.
  2. Diminishing substitutability: the two inputs can be substituted for one another, but at a diminishing rate and only up to a limit.
  3. Continuous production function: the inputs are perfectly divisible, so the production function is continuous.
  4. Rational producer: the producer behaves rationally, aiming to produce efficiently.

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