Determination of Optimum Product Combination

• Here, the choice of products should depend upon the marginal rate of product substitution and the price ratio.
• In principle, the maximum revenue from two products using given amounts of resources will be where the production possibility curve and iso-revenue line have the same slope.
• The other method to find out optimum level of two products is to calculate net revenue from many combinations and locate the line which promises the highest returns.
• Calculation of total returns from each combination of products and selecting the maximum revenue combination this way is feasible only for a small number of combinations.