Scale Line or Expansion

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Scale Line or Expansion

I’ll. If now the producer wishes to produce SO units of output instead of 60 units.which combination of factors will hc select’ Obviou.\ly, he will choose that cOllaboration which will cost him the least for producing SO units of output. Such a combination is Q’ at which iso-cost line is tangent to the iso-product curve II”’ which represents 80 units of output. This is shown in Pig. IY.7. Similarly, lor the production of 100 units of output. the producer will choose factor combination Q” ;rnd for 120 units of output his equilibrium will lie at Q': If points like Q. Q’, Q”, Q'” arc joined together, we get what is called scale line or expansion path.

TIllS line is known as a scale line because it the way in which the producer will ;rdju~t the scale of his operations a~ he change. the scale of his output. This is also called e,’pmansion pathas along this line he will expand his output, if relative rector pI ices lain the same. GIvan the prices of factors X and Y, a producer, who is ably to vary the mountainous both these factors. will always fix his scale of output at ~Pinpoint along thc- scale line such as Q. Q’, Q”, Q ‘: in Fig. 19.7. Producing on the scale inc ,hows the Hearst way of producing each level 01 output, given relatIve factor prices. An iso-quanr or the equal product curve represents different input combination, or input ratios which can produce a specified level of output, whereas the scale line shows different levels of output, input ratio remaining the same. It must be noted that slope of the scale line will depend on the relative prices of the factors and the shape of the iso-product curves. One cannot know at which point on a scale line the producer will be in equilibrium until one knows that output he wishes to produce. How a producer will decide about the level of output to be produced by him will depend upon the conditions in the product market. (Determination of price and output by the producer under different market types will be subject-matter of discussion of our later chapters numbering 27-30).

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