A curve showing the combinations of factor inputs that have constant market cost If firms are acting as pricetakers in factor markets the isocost curve is a straight line whose slope represents the relative prices of different factors services ID: 1027682
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1. Iso-cost
2. An iso-cost shows all the combinations of factors that cost the same to employ.A curve showing the combinations of factor inputs that have constant market cost. If firms are acting as price-takers in factor markets, the iso-cost curve is a straight line, whose slope represents the relative prices of different factors' services.
3. Iso-cost linesIso-cost lines represent the prices of factors. An iso-cost line graphically represents all the combinations of the inputs which the firm can achieve with a given budget for production or given outlay.Suppose the firm has 100 Rs. which it can spend on combinations of factor X and factor Y, the former priced at Rs. 10 per unit and the latter priced at Rs. 20. The firm can spend the entire amount on factor X or factor Y.Further, there will be various combinations of both factors which amount to the outlay. The iso-cost line represents all these combinations. Q1, Q2 and Q3 are three different isocosts. The isocost on the right represents a higher outlay.
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