1. To understand the reasons for the existence of firms
2. To describe how with only one variable input production takes place in the short run
3. To describe the long run process of production
4. To understand the meaning and importance of technological progress and to find out how it takes place.
While going through this analysis students may feel it is a revision of the indifference curve and the budget line. Isocost and isoquants play the same role in producer’s equilibrium as that played by the budget line and indifference curves in consumer’s equilibrium. Isocost curve is a producer’s budget line while isoquant is his indifference curve.