Question

Using the information given in the table, draw the isoquant corresponding to an output level of 27. Starting from L=6 and K= 2, how much extra capital is needed to keep output constant if the labor is reduced from L=6 to L=3? How much extra capital is needed to keep output constant if labor is increased from L=3 to L=4? K 1 1 10 14 2 14 19 3 17 22 4 20 24 5 22 26 6 24 27 یہ دن K, Capital ج 2024 22 26 24 27 27 29 30 30 32 33 32 34 35 33 35 36 ن 6 Using the four-point curved line drawing tool, graph the firm's isoquant for an output level of 27. Label this 'q = 27.' Carefully follow the instructions above, and only draw the required object. L, Labor

Answer 1

The output corresponding to L=6 and K=2 is 27.

It means 6 units of labor and 2 units of capital produces 27 units of output.

If L reduced from 6 to 3, then in order to keep output at 27 there is a need to increase the capital (K) from 2 to 4.

Hence, there is a need of 2 more units of capital (K).

In a similar fashion, if L increased from 3 to 4, then in order to keep output at 27 there is a need to decrease the capital (K) from 4 to 3.

Hence, there is a need to reduce capital (K) by 1 unit.

The isoquant curve shows the different combinations of Labor (L) and Capital (K) to produce a given level of output.

The following table shows the different combinations of L and K to produce 27 units of output.

L	K
2	6
3	4
4	3
6	2

K, Capital q=27 1 1 2 3 4 5 6 L, Labor