Consider, for example, a case in which L (Labour) = R10 per labour hour, K (Capital) = R20 per capital hour, and the budget = R200 an hour. Then the isocost line is described by the equation:

Question

Quizplus · Accepted Answer

The isocost line equation is derived from the budget constraint: 200 = 20K + 10L. Rearranging gives K = 200/20 - (10/20)L, which simplifies to K = 10 - 0.5L. All options represent the same isocost line in different forms.

Consider, for Example, a Case in Which L (Labour) =