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A curve connecting the tangency points is called the expansion path because it shows how the input usages expand as the chosen level of output expands. In economics , an expansion path (also called a scale line [ 1 ] ) is a path connecting optimal input combinations as the scale of production expands. [ 2 ]
As the target level of output is increased, the relevant isoquant becomes farther and farther out from the origin, and still it is optimal in a cost-minimization sense to operate at the tangency point of the relevant isoquant with an isocost curve. The set of all such tangency points is called the firm's expansion path.
An isoquant (derived from quantity and the Greek word isos, ίσος, meaning "equal"), in microeconomics, is a contour line drawn through the set of points at which the same quantity of output is produced while changing the quantities of two or more inputs.
A line connecting all points of tangency between the indifference curve and the budget constraint is called the expansion path. [10] All two dimensional budget constraints are generalized into the equation: + = Where: = money income allocated to consumption (after saving and borrowing)
In economics and particularly in consumer choice theory, the income-consumption curve (also called income expansion path and income offer curve) is a curve in a graph in which the quantities of two goods are plotted on the two axes; the curve is the locus of points showing the consumption bundles chosen at each of various levels of income.
The cost-minimization problem of the firm is to choose an input bundle (K,L) feasible for the output level y that costs as little as possible. A cost-minimizing input bundle is a point on the isoquant for the given y that is on the lowest possible isocost line. Put differently, a cost-minimizing input bundle must satisfy two conditions:
However, there is no hard and fast definition as to what is classified as "long" or "short" and mostly relies on the economic perspective being taken. Marshall's original introduction of long-run and short-run economics reflected the 'long-period method' that was a common analysis used by classical political economists.
Economic contraction and expansion relate to the overall output of all goods and services, while the terms "inflation" and "deflation" refer to increasing and decreasing prices of commodities, goods and services in relation to the value of money. [citation needed] On the microeconomic level, expansion may involve enlarging the scale of a ...