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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] It is often represented as a curve in a graph with quantities of two inputs, typically physical capital and labor , plotted on the axes.
At each price there is a single corresponding quantity of either good. Due to this, by modeling the good with the changing price as any particular good and the good with the unchanging price as all other goods, the price-consumption curve can be used to construct an individual's demand curve for any particular good. [1]
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.
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 grey line shows the Income–consumption curve (the consumer theory equivalent to the Expansion path) of a series of Leontief utility curves. In Figure 1, the consumer would rather be on I 3 than I 2 , and would rather be on I 2 than I 1 , but does not care where he/she is on a given indifference curve.
An example of real GDP (y) plotted against time (x).Often time is denoted as t instead of x. The IS curve moves to the right if spending plans at any potential interest rate go up, causing the new equilibrium to have higher interest rates (i) and expansion in the "real" economy (real GDP, or Y).
A) Example of an isoquant map with two inputs that are perfect substitutes. B) Example of an isoquant map with two inputs that are perfect complements. 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 ...
For example, when inputs (labor and capital) increase by 100%, output increases by 100%. If output increases by less than the proportional change in all inputs, there are decreasing returns to scale (DRS). For example, when inputs (labor and capital) increase by 100%, the increase in output is less than 100%.