What is the least cost combination of inputs?

What is the least cost combination of inputs?

The cost line or budget line for production is called the isocost line. The first order conditions state that the variable factors are combined in an optimal manner when the ratio of marginal products is equal to the ratio of factor prices. This optimal combination is called the least cost combination of inputs.

How do you get the least cost combination?

The criteria for obtaining least and combination is MRS = PR and hence graphically it can be obtained where slope of Isoquant = slope of Iso-cost lines. This is found whore Iso-quant and Iso-cost lines tangent to each other. From this tangency point takes perpendiculars to both axis and obtains units of and x2.

What is the least cost combination of resources?

Least Cost Combination occurs when a firm adjusts their employment of resources to minimize costs. The least cost combination is found where the marginal product per dollar for all the resources a firm employs are equal (MPL/PL=MPN/PN=MPC/PC).

Which line indicates minimum cost combination at different level of production?

isocost line
The isocost line is combined with the isoquant map to determine the optimal production point at any given level of output. Specifically, the point of tangency between any isoquant and an isocost line gives the lowest-cost combination of inputs that can produce the level of output associated with that isoquant.

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Which is the least cost combination of inputs?

vii) Least cost combination: The problem here is to find out a combination of inputs, which should cost the least, i.e., minimization of cost. The tangency of isocost and isoquant would indicate the least cost combination of X 1 and X 2 , i.e., slope of isoquant = slope of isocost. Least cost combination is given, algebraically, by equating

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Which is the best cost combination in economics?

cost combination. factors. 1. To minimise its cost for a given output. 2. to maximise its output for given cost. are combined in an optimum manner. 1. There are two factors of production – labour & capital. 2. All units of labour & capital are homogeneous. 3. The prices of units of labour (w) & capital (r) are given & constant. 4.