Illustrate the concept of producer’s equilibrium?

1.	Illustrate the concept of producer’s equilibrium?
Answer» Producer equilibrium implies the situation where producer maximizes his output. It is also known as optimum combination of the factors of production. In short, the producer manufactures a given amount of output with ‘least cost combination of factors’ , with his given budget. Optimum Combination of Factors implies either: There is output maximisation for given inputs or there is cost minimisation for the given output. Conditions for Producer Equilibrium: The two conditions that are to be fulfilled for the attainment of producer equilibrium are: The iso – cost line must be tangent to iso – quant curve. At point of tangency, the iso-quant curve must be convex to the origin or MRTSLk must be declining.

Answer»

Producer equilibrium implies the situation where producer maximizes his output. It is also known as optimum combination of the factors of production. In short, the producer manufactures a given amount of output with ‘least cost combination of factors’ , with his given budget.

Optimum Combination of Factors implies either: There is output maximisation for given inputs or there is cost minimisation for the given output.

Conditions for Producer Equilibrium: The two conditions that are to be fulfilled for the attainment of producer equilibrium are: The iso – cost line must be tangent to iso – quant curve. At point of tangency, the iso-quant curve must be convex to the origin or MRTSLk must be declining.

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