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presentation prepared by 2011 humanities batch under the leadership of mathew j. vettickal
under the super vision of sudheesh plathottam

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  1. 1. CHAPTER =3<br />PRODUCTION, COSTS AND <br /> REVENUE<br />
  2. 2. PRODUCTION<br /> Production refers to the creation of material things. In economics the word <br />production is used in a broader sense to include the creation of material<br />commodities as well as non-material services. But only productive activities which create value are included in production<br />Production is the creation of value<br />
  3. 3. TotalProduct<br /> Total product refers to<br />total output at a particular<br />level of employment of a<br />variable input, keeping all<br />other inputs constant<br />
  4. 4. Average Product <br /> Average product is the <br />output produced per unit of a <br />variable input. This can be found <br />out by dividing total out put by <br />the number of units of the variable <br />factor employed.<br /> AP=TP/X <br />X=number of variable input<br />
  5. 5. Marginal Product<br /> Marginal product is the addition <br />made to total product through the <br />employment of an additional unit of a <br />variable input, keeping all other inputs <br />constant.<br />MP= q / x<br />Q is change in output<br />X is change in input<br />
  6. 6. Returns to scale<br /><ul><li>Increasing Returns to Scale
  7. 7. Constant Returns to Scale
  8. 8. Diminishing Returns to scale</li></li></ul><li>Increasing Returns to scale<br /> This is the situation in which <br /> proportionate increase in all factors <br /> of Production leads to more than <br />proportionate increase in output<br />Constant Returns to Scale<br /> Constant returns to scale is the <br />situation in which a given proportionate<br />increase in factor causes equally <br />proportionate increase in output .<br />
  9. 9. Diminishing Returns to Scale<br /> Diminishing returns to <br />scale is the situation in which <br />proportionate Increase in inputs <br />causes a less than proportionate <br />increase in output<br />
  10. 10. COST<br /> Cost refer to <br />the expenses incurred in <br /> production cost is an <br />important concept in <br /> production<br />
  11. 11. Fixed cost<br /> Fixed costs are those costs <br /> which remain fixed. Fixed costs <br />do not change with output<br />Variable cost<br /> Variable costs are those costs <br />that vary with output. They vary <br />directly with output<br />
  12. 12. Types of Cost of Production<br /><ul><li>Money cost and real cost
  13. 13. Private cost and social cost
  14. 14. Explicit and implicit cost
  15. 15. Opportunity cost
  16. 16. Total fixed cost ,Total variable </li></ul> cost , Total cost<br />
  17. 17. Average Variable cost =TVC/output<br />Average Fixed cost =TFC/output<br />Average cost=TC/output<br />
  18. 18. Marginal cost <br /> Marginal cost is the additional <br />cost . It is the addition made to <br />total cost by Producing an <br /> additional unit of the commodity<br />
  19. 19. REVENUE<br />Revenue refers to the sale proceeds of the firm . It is the receipts from sale<br />
  20. 20. Total Revenue<br /> Total revenue is the <br />total sales proceeds of <br /> the firm<br />TR=P*Q<br />P=Price<br />Q=Quantity sold<br />
  21. 21. Average Revenue<br /> Average revenue is the revenue per unit of output sold<br />Marginal Revenue<br /> Additional revenue obtained <br />from the sale of an additional<br />Unit of the commodity<br />
  22. 22. Break Even Chart<br />