Draw an isoquant map showing 4 different isoquants. Label the horizontal axis Labor, and label the vertical axis Capital. Label the isoquants Q1, Q2, Q3, and Q4. Graph the following curves by clicking here
Which isoquant represents the highest output level?
Draw a straight, downward-sloping line representing the factor price ratio w/r.
Draw this line so that it is just tangent to isoquant Q3, and label it (w/r)1. How much capital and how much labor would this firm employ? Mark these points on your graph as K1 and L1.
Suppose capital became more expensive relative to labor. Assuming this firm wishes to continue to produce Q3 units of output, how would this affect your graph? Indicate this change on your graph, and label the new factor price line (w/r)2. How would this firm change its choice of how much capital and labor to use in reaction to the change in relative factor prices? Mark the new quantities on your graph as K2 and L2.
View graphing answers to question 1 by clicking here
Draw a consumer indifference curve map showing four different indifference curves. Put pencils on the horizontal axis and oatmeal on the vertical axis. Label these indifference curves S1, S2, S3, and S4.
Graph the following curves by clicking here
Which indifference curve represents the highest level of welfare?
Draw a straight, downward-sloping line representing the budget constraint. Draw this line so that it is just tangent to indifference curve S3, and label it (BC)1. What is this line’s slope? What combination of pencils and oatmeal will this consumer choose to consume? Mark these points on your graph as X1 and Y1.
Suppose pencils became more expensive relative to oatmeal. Assuming the consumer’s income is changed such that the budget line is still just tangent to indifference curve S3, how would this affect your graph? Indicate this change on your graph, and label the new budget constraint line (BC)2. How would this consumer change his or her choice of combination of pencils and oatmeal to consume? Mark the new quantities on your graph as X2 and Y2.
View graphing answers to question 2 by clicking here
Draw a production possibilities frontier assuming increasing opportunity costs. How would a PPF under the assumption of constant opportunity costs be different from the one you’ve graphed?
Graph the following curves by clicking here View graphing answers to question 3 by clicking here
