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Q. 5. What is the effect of a change in input prices on producer's equilibrium using iso quant and iso cost line curve..? This mo production accord wutput ne/ she desires. On The The hand, this line is also termed as expansion path because the producer the co Outs to expand his/ her output by following this path when the prices of factors es of K Main constant. Producers would prefer to move along the scale line to increase output to get maximum output at least cost with fixed factor prices. us the the 5. What is the effect of a change in input prices on producer's equilibrium? [2010 (R) jantity ". A firm's optimal employment of inputs depends upon the prices of the and innuts. In fact, when the price of an input changes, the manager will have to s the 4 if he is to continue minimising the cost of producing a given output. suppose, that the firm has minimised costs and is operating where at the initial ation cost-minimising position. MPL imal MPLO MPKO I the Wo PKO mix If the wage rate increases from Wo to Wj, then MPL MPKO mintu = mpxxr WI PKO mp= = mr. That is, an increase in the wage rate causes the additional output resulting from spending $100 more on labour to be less than the additional output