Compare Isoquant Isocost IC BC PPF

Isoquant

Combinations of inputs which produce the same amount of output. Combined with isocost to determine cost-minimization production or output maximization.

X, Y axis, inputs
Convex

Isocost

Combinations of inputs which all cost the same amount. Combined with isoquant to determine cost-minimization production or output maximization.
X, Y axis, inputs
Negative slop straight line

Indifference curve (IC)

Used in consume theory. Combinations of goods which let consumer have the same utility. Combined with budget constraint to get utility-maximization or cost-minimization.

X, Y axis, goods for consumer
Convex

Slop is called marginal rate of substitution (MRS).

Budget constraint (BC)

Used in consume theory. Combinations of goods which cost the same amount. Combined with indifference curve to get utility-maximization or cost-minimization.

X, Y axis, goods for consumer
Negative slop straight line

Production-possibility frontier (PPF)

Given limited resources, the possible maximum obtainable combinations of two outputs. Used to get profit-maximization.

X, Y axis, outputs
Concave

Slop is called marginal rate of transformation (MRT).

Similarity

Isoquant likes indifference curve (isoquant can be seen as producer consume two goods)
Isocost likes budget constraint

  • IC and BC generate demand curve. see here
  • Similar to IC + BC, isoquant and isocost generate input demand curve. (If the input is labor, we get labor demand curve).

Income and leisure can be seen as two goods to consume by worker

  • Similar to IC + BC, utility curve and income constraint generate leisure demand curve, which can be converted to labor supply curve.

Invisible Hand

The X, Y axis of IC, BC and PPF are the same things. The three can construct a graph showing the invisible hand. (MRS=slop of BC=MRT)

Further study

Isocost and BC like PPF. We will discuss further here. What if Isocost or BC not a straight line, that's price can changes?

See also

Derive demand curve from indifference curve
Similarity of demand curve and labor supply curve

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