How to read this
The blue curve is the isoquant for output . Each grey line is an isocost line: bundles with the same cost . The cheapest way to produce is where a line just touches the isoquant: , with .
- Find it yourself: push the isocost line towards the origin until it only just touches.
- Raise : the line tilts, and the firm substitutes towards input 2.
- Try Linear and Leontief: a corner and a kink, with no tangency at all.
Technology
Scale (does not change the input mix)
Prices and output
Isocost line
slide the line down
Plot range
Input space
isoquant with the shaded set ; isocost lines; your isocost line; expansion path (the cost-minimising bundles for every ).