What Is Expansion Path in Economics
If all points of tangency like LMN are joined by a line OP it is the least-outlay curve or the expansion path of a firm. It is the curve along which output or expenditure changes when factor prices remain constant. Examples And Exercises On The Output Expansion Path A producer seeking to produce the most units of a product in the cheapest possible way attempts to increase production along the. . Expansion path may be defined as the locus of points which show all the least cost combinations of factors corresponding to different levels of output. All these points indicates minimum cost combinations of two factors at various levels of output. The point where the isocost line is tangent to an isoquant represents the least- cost combination of the two factors for producing a given output. We can reverse this proposition and ask instead How does the output of the firm change if all its inputs change simultaneously. By connecting...
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