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  • 1. P RODUCTION F UNCTION T YPE O F P RODUCTION F UNCTION 1. L INEAR O R H OMOGENEOUS 2. N ON L INEAR O R H OMOGENEOUS 3. S HORT R UN P RODUCTION F UNCTION 4. L ONG R UN P RODUCTION F UNCTION
  • 2. T WO A SPECTS OF P RODUCTION:
    • 1. COST ANALYSIS
    • 2. REVENUE ANALYSIS
  • 3. COST ANALTSIS
    • SHORT RUN COST
    • FIXED FACTORS
    • VARIABLE FACTORS
    • 2. LONG RUN COST
  • 4. TYPE OF COST IN SHORT PERIOD
    • FIXED COST
    • FIXED COST CAN NEVER ZERO
    • TFC REMAIN FIXED
    • AFC WILL GO ON DIMINISHING
    AFC=TFC/OUTPUT
  • 5. GRAPHICAL REPRESENTATION 100 80 70 60 40 20 1 2 3 4 5 0 TFC AFC UNIT TFC AFC _ 100 50 33 25 20 100 100 100 100 100 100 0 1 2 3 4 5 AFC TFC UNIT
  • 6. VARIABLE COST
    • VARIABLE COST CAN BE ZERO
    • TVC INCREASES OR DECREASES
    • AVC DIMINISHING UPTO A POINT THEN INCREASING
    AVC=TVC/OUTPUT
  • 7. GRAPHICAL REPRESENTATION 10 20 30 40 50 60 0 1 2 3 4 5 6 7 TVC AVC AVC 10 9 8 7 6 7 8 TVC10 10 15 24 25 30 42 56 UNIT 1 2 3 4 5 6 7
  • 8. WHY AC IS U-SHAPED? AC=AFC+AVC UNIT AC At first AFC or AVC falls, as a result AC also falls. After a point AFC start falling at low rate,whereas AVC start rising at a greater rate. As a result AC start rising,it become U-Shaped.
  • 9. R EVENUE A NALYSIS REVENUE ANALYSIS TOTAL REVENUE AVERAGE REVENUE MARGINAL REVENUE