6.14 : 등비용

The isocost line represents all the combinations of inputs, typically labor and capital, that a firm can purchase given a specific budget.

It illustrates a firm's various choices between different inputs while maintaining the same budget.

Mathematically, the isocost line is a linear equation, where C is the total cost, w is the wage rate, L is the quantity of labor, r is the rental rate of capital, and K is the quantity of capital.

Consider a bakery with a budget of $200 per day to spend on labor and capital. If the wage rate is $10 per hour and the rental rate of capital is $20 per unit, the isocost can be represented as shown.

If the bakery spends its entire budget on labor, it can afford 20 hours of labor with no capital. Conversely, if it allocates the whole budget to capital, it can rent ten units of capital without employing any labor.

Connecting these two points gives the isocost line