馃攳
noc18-mg23 Lec 12-Long Run Production Function and Isoquant - YouTube
Channel: unknown
[10]
[Music]
[13]
yes when we talk about long-run curve as
[19]
we said in a to practice of production
[23]
when we consider two factors of
[25]
production both the factors are
[28]
variables so here we are talking about
[31]
long-run production function we're
[34]
number one
[35]
both the factors of productions are
[38]
variable where both the factors of
[42]
production in a two factor production
[44]
both the factors of productions are
[46]
variable
[57]
yes and we understand this scenario
[64]
based on an ISO quand ISO quality where
[73]
ISO means same quant means quantity yes
[85]
isoquant ISO means same and quant means
[88]
quantity but what is this same quantity
[93]
we achieve a same quantity of output
[98]
given different combinations of capital
[103]
and labor of capital and labor so I go
[118]
back to my indifference curve where the
[123]
satisfaction was same with different
[126]
combinations of two commodities x and y
[129]
apples and origins oranges rascal
[131]
learned gulab jamun and so and so forth
[134]
yah-hoo paracetamol and you know two
[137]
different procedure malls the doctors
[139]
and nurses paracetamol and n decide
[142]
whatever any two commodities and Miss
[144]
registration remains same here and
[147]
different combinations of those
[149]
communities where my satisfaction is
[150]
same on the same curve which is
[152]
indifference curve here it is all
[153]
together same ISO quant in the same
[156]
curve I get different combinations of
[161]
capital and labor which gives my I Q is
[166]
for stands for isoquant as I see for
[169]
indifference curve and I get different
[172]
combinations of capital and labor which
[177]
eventually let us take that it is
[179]
hundred units of you know or let's say
[184]
hundred patients
[188]
hundred patients and over here we can
[192]
take as doctors and nurses or something
[195]
like that you know doctors and some
[199]
other capitals
[200]
you know maybe capital it can be bid and
[204]
other equipment yeah and then we can
[208]
have different combinations of doctors
[210]
and capitals in our healthcare providers
[215]
it can be doctor nurse anything and
[218]
capital yes in a primary health center
[224]
there should be at least one doctor
[226]
three nurses and one male nurse
[229]
yes total five we hardly have you know
[232]
in any pedes we have hardly have filled
[235]
up that coder anyways so this is the
[237]
isoquant which gives and now you can see
[241]
as it's a long-run production function
[244]
as it's a long-run production function
[248]
we can see that both the capital are
[251]
varying and then the labor can also vary
[257]
and while I am varying the capital and
[260]
labor we are identifying all different
[263]
combinations which give me a desired
[266]
level of outcome so if I want to
[270]
increase again mood is better I want to
[273]
increase the my production you know I
[276]
can either increase capital I can
[281]
increase my capital keeping the labor
[283]
same or I can increase my number of
[289]
labor I can increase the number of labor
[292]
keeping the capital same or if I want to
[295]
go to this point I can increase then my
[299]
number of capital keeping the labor same
[304]
yes so and you know it varies and then I
[308]
can change both the capital and labor to
[311]
remain on a higher indifference a higher
[313]
ISO point that's upon you completely so
[317]
when in isoquant we have like the dim
[321]
dishing marginal return so what happens
[324]
if we plot this diminishing marginal
[327]
return on isoquant what we see we can
[330]
observe something like this again as
[336]
indifference curve to isoquants cannot
[339]
intersect each other they will only
[343]
shift parallely so if this Q or Alton
[348]
write it as IQ one is 55 IQ 2 is 75 and
[357]
I Q 3 as 90 okay now what I observe is
[368]
my labor is 1 labor is 2 and labor is 3
[379]
labor is 3 now with this three level
[386]
when I increase my number of labor from
[388]
0 1 2 3 I observe that my you know the
[394]
output is increasing by first 20 units
[400]
and then 15 units that means the
[402]
marginal return with every single unit
[405]
of labor is decreasing right so
[408]
diminishing marginal return
[423]
is being followed when it increases from
[428]
zero to one it is by 2004 so I will keep
[433]
it like say one to two it is by 20 units
[437]
from 2 to 3 it is 15 units or from 0 to
[442]
1 if we want to keep then it is by 55
[445]
units yes that is a diminishing marginal
[448]
return and the same can be observed in
[450]
terms of capital if my labor remains
[458]
fixed at 3 and my capital increases from
[461]
1 2 to 3 and I can see from 0 to 1 for
[466]
capital 0 to 1 it increases by 55 units
[470]
from 1 to 2 it increases by 20 units 75
[474]
minus 55 and from 2 to 3 it increases by
[478]
15 units so diminishing marginal return
[481]
is being followed here now when we talk
[487]
about the slope if you can remember the
[489]
indifference curve the slope is given by
[493]
this substitutability marginal rate of
[494]
substitution right the substitutability
[496]
between two commodities yes now here in
[500]
a similar way when we talk about the
[504]
slope of isoquant we talk about the
[511]
trade-off between two inputs now that
[516]
can be stated as marginal rate of
[518]
technical substitution marginal rate of
[530]
technical substitution what is different
[535]
here the difference is the world
[538]
technical the difference is the word
[541]
technical because it's a production
[542]
process marginal rate so whenever it's
[545]
marginal rate of substitution we are
[546]
talking about the consumer behavior
[548]
substitution between two commodities
[549]
whenever it is marginal rate of
[551]
technical substitution we are talking
[554]
about technology we are talking about
[556]
some production process then it's like
[558]
marginal rate of substitution between
[563]
whenever it's the technical substitution
[565]
between two factor of production like
[569]
marginal rate of technical substitution
[571]
which we can state like M R T is is
[576]
given the - you can give you cannot give
[580]
its upon you is the change in capital
[584]
with respect to one unit change in labor
[588]
it can be the other way around as well
[590]
Delta L by Delta K so change in one
[592]
factors of production with respect to
[594]
change in the other factors of
[596]
production at fixed level of Q or fixed
[600]
level of output right because on an
[605]
isoquant
[606]
output is same and when I am at the
[608]
isoquant
[609]
I am trying to see the rate of trade of
[612]
substitutability between capital and
[615]
labor yes and that is given by this
[619]
Delta K and Delta L on a particular
[622]
isoquant where this output is fixed yes
[630]
therefore when we are talking about the
[634]
slope or margin of isoquant or marginal
[637]
rate of technical substitution it gives
[639]
us an idea that for one additional unit
[643]
of capital
[644]
how many labor I will sacrifice or vice
[648]
versa for one additional unit of labour
[651]
how many capital I need to sacrifice to
[655]
remain or to produce a particular amount
[660]
of output yes so this is the implication
[666]
or this is the interpretation of this
[667]
slope that with per unit capital o power
[672]
per unit increase in labour how much
[674]
capital I am sacrificing therefore in
[677]
marginal rate of technical substitution
[678]
gives user you an idea about that for
[688]
see one
[703]
and we can see for one unit of Labor
[708]
with while increasing labor when it is
[712]
increasing by 1 unit 1 to 2 2 to 3 3 to
[714]
4 4 to 5 5 to 6 or 0 to 1
[716]
how many capital I am sacrificing say
[721]
this is 70 this comes down to 55 this
[727]
comes down so here I have sacrificed 15
[730]
units this may be my 45 this can be so
[737]
here 15 units 10 units this can be 40
[742]
this can be 36 or 37 and so on so the
[748]
amount of capital I am sacrificing it's
[751]
coming down that's primarily because
[753]
that technical and this is called the
[755]
diminishing rate you know so what is
[758]
happening when I am sacrificing when I
[761]
am at the lower level of Labor input I
[764]
will require more and more of capital
[767]
when my labor input increases I don't
[769]
want to my capital input is coming down
[772]
and at a certain level I don't really
[774]
want to you know sacrifice that many
[777]
capital because capital also use is also
[779]
useful and very very useful so I will
[782]
have to keep a basic minimum level of
[784]
capital and with the factor increase of
[787]
labor this labor input is being turning
[789]
inefficient which inefficiency has to be
[794]
made up by the capital the minimum level
[796]
of capital because over here if I am
[799]
causing inefficiency with more and more
[801]
labor I don't I cannot afford to lose
[805]
more and more amount of capital so that
[807]
I am being you know kind of I am being
[811]
kind of skeptical in terms of
[814]
sacrificing the amount of capital so
[816]
when I am increasing my labor so this is
[820]
the diminishing or decreasing marginal
[822]
rate of technical substitution thank you
[828]
[Music]
[846]
[Music]
Most Recent Videos:
You can go back to the homepage right here: Homepage