During the last 30 years computers have changed most production processes. Use an isocost-isoquant diagram to show the effect the spread of computers have had on labor during the last 30 years.

What will be an ideal response?

Many answers are possible. But here is one possible one:

  

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Since the price of computers has gone down, the isocost becomes steeper with respect to labor. Even if we assume productivity of labor and capital (shapes) of isoquants remained the same, companies would be replaced some workers for computers. Nevertheless, isoquants probably did not remain the same. Some students could say that the productivity of workers increased due with the use of computers; hence the isoquant would become steeper. Other students might argue that capital is more productive, and hence the isoquants would become flatter.