Indifference curves

They are defined as sets of points in space of combinations goodsfor that consumer
satisfaction is identical, ie for all points belonging to the same curve, the consumer has no
preference for the combination represented by one of the combination represented by another.
Consumer satisfaction is characterized byutility function in which the variables are the quantities
of each well represented by the value on each axis.
Consumer preferences let you choose between different consumption baskets. If you are
offered a consumer two different baskets, you choose which best suits your tastes. If the two
meet your tastes equally, it is said that the consumer is indifferent between the two baskets.
There are discrepancies between authors about whether continuity, differentiability and
convexity of the curves are guaranteed and this has strong implications for the discussion of
existenceor not equilibrium points. From a mathematical point of view the discussion
involvesaxiom of choice.
The most common plot contains two alternative goods (X and Y in Figure 1) between the
consumer can choose, shown in abscissa and ordinate respectively. The points of each curve
thus represent combinations of goods X and Y that provide the same utility to the consumer.
isoquants
We use a graph to show the combination of two factors of production of goods: capital and
labor. On the y-axis shows the units of capital that can be used in the production of goods and,
on the abscissa, the work units.
Each point on the curve represents a combination of capital and labor can produce a certain
amount of goods. According to the production method used, the more capital and fewer labor
and many workers are used with few tools are used. The resulting curve is called isocuanta:
equal amount of production with different amounts of factors, depending on the method used.
If the company wishes to study different production levels, trace a map of possibilities, with
several isoquants.
isocost
As we calculate the budget line for the consumer, calculating the isocost for the entrepreneur is
performed. This can devote all its resources to the purchase of machinery or payment of wages.
None of these extreme positions serves as: either no one would handle the machines or
workers would lack the necessary elements to do your homework.
The entrepreneur combines capital and labor considering the price you pay for each unit of
these factors, tracing a line isocost. This line connects the dots that indicate the various
combinations of two factors of production involving a similar cost.
In short, taking into account the prices of factors of production, the entrepreneur can choose the
method of production that yields the lowest cost per unit.