Isocost Line Concept

Isocost is a straight line drawn on a graphic in which each one of the axis corresponds to one of the productive factors and in which each one of its points represents a possible combination of the productive factors with the same total cost. The lines are straight for the fact of the productive factors prices being constant and have negative that corresponds to the ratio between the prices of each one of the productive factors. Given the chance of the productive factors prices being constant, whatever be the acquired quantity, the straight line isocost will form a map of parallel lines that fill all the space of the graphic’s positive quarter.

The utility of this map of straight line isocost relies in the fact of being able to be combined with an isoquants map allowing calculating the minimum cost for each production level.

 

Translated from Portuguese by Susana Saraiva, Portuguese-English and English-Portuguese translation specialist. Contact: spams@sapo.pt.