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Production Function
The graph above shows a 3d version of a production function. The x-axis has labor measured in thousands of man hours per day. Y-axis measures machine hours per day. The Z-axis measures the total output produced using this production.
A typical Cobb-Douglas production function is given by:
Indifference curves represents tastes, while isoquants arise from production functions, which are the technological constraints faced by producers.
Isoquants slope down: Keeping output constant, more labour means less capital– Isoquants are monotonic, thin and do not cross.
Utility is not measureable, meaning there is no objective interpretation as to the numbers accompanying indifference curves, beyond the ordering.
Isoquants reflect output which is measurable
– Doubling all values associated with an indifference map leaves us with the same tastes as before
– Doubling all values associated with isoquants alters the production technology, with the new technology producing twice as much output from any bundle of inputs (Returns to scale)
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