 This is the fourth video of the every theory of production of your gear economics past semester course. In fact, this is also the last video of the evening. In the earlier few videos of this unit, we have discussed very important concepts relating to the theory of productions. In this video, we shall discuss firms equilibrium with the help of issupoints and the concept of expansion part. The concept of equilibrium of a firm can be explained with the help of issupoints and issupoints cost lines. And in our earlier units of markets, we have already discussed these units with the help of total revenue and total cost curves. Now an issupoints map represents the various factor combinations which can yield various levels of output. Please note that this is similar to the concept of the difference map of a consumer. We have already come across. Now let us introduce the concept of the issupoints line. The prices of factors are represented by the issupoints line. This is again similar to the budget line of the consumer we have already come across while discussing the consumer behavior units. The issupoints line determines what combination of factors the firm will choose for production. When issupoints line shows various combinations of two factors that the firm can buy with a given outlook. The concept of issupoints line has been explained with the help of figures 7.10. In the figures 7.10, an issupoints line where units of labor are measured on the x-axis and units of capital are measured on the y-axis. We assume that the prices of factors are given and constant for the firm. If the firm can spend Rs 300 which labor costs at Rs 4 per labor hour and capital costs of Rs 5 per machine hour. Then the producer can buy 75 units of labor maximum if it spends the entire amount on labor or 60 units of capital if it spends entire amount of Rs 300 in capital. Now let O L represent 75 units of labor and O K represent 60 units of capital as shown in figures 7.10. Joining points K and L we get the issupoints line which passes through all combinations of labor and capital. This is the firm can buy with Rs 300. Thus an issupoints line can be defined as the locus of various combinations of factors which the firm can buy with a constant outlook. The issupoints line is also called the price line or the outlook line. Now the issupoints line seeps when the total outlook layer which the firm wants to spend on the factors senders. A greater outlook layer will cause the issupoints line to seep to the right. The equilibrium condition of the firm depends on its objectives. As mentioned earlier an issupoints map given the various factor combinations which can yield various levels of output. Every issupoints showing those factor combinations which can produce a specified level of output. A familiar issupoints line represents the various levels of total cost or outlook given the prices of the factors. The entrepreneurs may minimize cost subject to given output or maximize output for a given cost. If the entrepreneur has already decided about the level of output he or she will choose the combination of factors which minimizes the cost of production. That is he or she will choose the least cost combination of factors. We have already said that the point of least cost combination of factors for any level of output is where the issupoints can send to an issupoints line. We have already said that the point of least combination of factors for any level of output is where the issupoints are cancel to an issupoints line. The point of tendency is the point where a straight line touches a curve. ఇనియల ంధతి వాతిని షిసిన乃తి వియరిడిని సమికిని నిసాన పిరంనాని వాస౟ంన౿ నిసటిలౕ, బరి,ంనినాసిసి పిసినాసి మామాసిసి మాపి సిమాస and he or she has to decide which level of cost will maximize his or her profit. Profit will be maximum at point E from the figure you can see where the ISO point IQ thus is the ISO cost line BB. At this point the producer uses over a amount of labor and okay amount of capital. Points other than E cannot be point of equilibrium as other points cannot fulfill the condition of tangency. If you consider the point R cost is beyond the reach of the producer. Therefore the producer will not choose a combination other than E which is the least cost factor combination for producing hundred units of output. It should be remembered that the point of tangency between the ISO cost and ISO cost is not a necessary condition for producer's equilibrium. At the point of tangency the ISO cost must be convex to the origin. In other words marginal network technical substitution of labor for capital must be diminishing. Now let us discuss a different situation. The second situation of output maximization for a given level of cost and it has been shown with the help of figure 7.12. With a given or clear there will be a single ISO cost line. The firm will have to choose a factor combination lying on the given ISO cost line. The producer will now be in equilibrium at point A where IQ 2 is tangent to KL using ON units of labor and OH units of capital. You can see from the alongside figure. The firm has the option of producing at R as T and J but point E enables the firm to reach the highest possible ISO point Q3 producing 300 units of output. Now let us discuss the concept of expansion part. This has been shown with the help of figure 7.8. In figure 7.8 the firm's production function represents constant returns to scale. When one inch of labor hour and one hour of machine time are used an output of 10 units is produced. When both inputs are doubled output doubles from 10 to 20 when both units are tripled output doubles from 10 to 30. After discussing how a producer is in equilibrium we can now in a position to study how a producer will sense his factor combination as he expands output with given factor prices. We can study how we will produce with the help of ISO cost and ISO cost. Suppose the producer uses labor and capital and their prices are represented by the outside cost line AA which is shown in the next page. Please note that the expansion part may have different shape depending upon the relative prices of the productive factors used and the shape of the ISO point. Since expansion part represents minimum cost combination for various levels of output it shows the simplest way of producing its output even the relative prices of the factors. The constant expansion part has been shown in figure 7.13. Depending on the ISO cost line AA there are other three ISO points B, B, C, C and DD which show different levels of total cost or output. Suppose the producer wants to produce 100 units of output then he will produce at point E1. Suppose he wants to produce 200 units of output he will choose to produce at E2 which is a point of tendency between ISO cost, current B, B and ISO point IQ2. Likewise for higher level of output say 300 and 400. The firm will present respectively produce at E3 and E4. If we join all these cost equilibrium points E1, E2, E3 and E4 we get expansion part. Thus expansion part may be defined as the focus of the points of tendency between the equal product curves and ISO cost lines as the firm expands up. Thank you.