Question

impact of increase in prices of both inputs on isocost line keeping other things constant​

Answer 1

Comparative statics for a cost-minimizing firm using two inputs

Comparative statics for input prices

If all input prices change by the same percentage then the price ratio remains the same, so the isocost lines have the same slope, and the optimal input bundle remains the same. Consequently the cost of producing any given output rises by the same percentage as do the input prices.

If one input price increases, while the others remain the same then the slope of the isoquant changes. If the price of input 1 increases, for example, the slope of every isocost line increases. If the isoquant is smooth, the optimal input bundle consequently moves around the isoquant, the amount of input 1 decreasing and the amount of input 2 increasing.