What is the Importance of Ridge Line in Production? – Explained

Ridge lines eliminate economically irrelevant input combinations and encompass economically feasible range of production. In an isoquant map (which shows all isoquants for a particular method of production in a two dimensional space), we obtain two ridge lines – one is called the upper ridge line and the other is referred to as lower ridge line.

The upper ridge line passes through those points of the isoquants where marginal productivity of capital is zero and the lower isoquant passes though those points of the isoquants where marginal productivity of labour is zero. Here it is assumed that the vertical axis measures capital and the horizontal axis measures labour.

Diagram 8.11 shows isoquant map of a particular product. For the sake of simplicity, only three isoquants viz., IQ₁ IQ₂ and IQ₃ are drawn. Compare points a and a’ on IQ₁ Point a’ requires Ok₁ units of capital and k₁a’ units of labour and point ‘a’ calls for Ok₂ units of capital and k₂a units of labour but both the input combinations produce the same quantity of output. It is clear from the above diagram that k₁a’> k₂a and Ok₁ > Ok₂.

So a’ employs more of both the inputs than point ‘a’ even though those two points represent the same level of output. Thus, point a’ is inferior to point ‘a’. No only for point a’, it is true for all the points lying above point ‘a’ on isoquant IQ₁.

Similarly, by comparing p and p’, it can also be established that all the points right to ‘p’ are inefficient because they require more of both the inputs in order to produce the same level of output. Thus, points in the range of ‘a’ to ‘p’ on IQ₁ are economically feasible. For IQ₃ and IQ₂, feasible combinations lie between ‘b’ to ‘q’ and ‘c’ to ‘r’ respectively.

The line that connects upper boundary points of isoqunts (i.e., a, b and c) is called upper ridge line and the line that joins lower boundary points of isoquants (i.e., p, q and r) is called lower ridge line. The region above the upper ridge line ‘Oabc’ and below the lower ridge line ‘Opqr’ are economically inefficient as compared to the area within the two ridge lines, i.e. ‘cbaOpqr’.