Producer Behaviour

1. PRESENTATION ON
PRODUCER BEHAVIOR
PRESENTED BY:-
GROUP 4
Abhishek Anand
Avinash Keshri
Khushboo Sinha
Kumar Rishab
Priyamvada
Sweta

2. Production
 The theory of the firm ,describes how a firm
makes cost minimising production decision and
how the firm’s resulting cost varies with its
output.
The Production decisions of a firm
The production decisions of firms are analogous to the
purchasing decisions of consumers, and can likewise be
understood in three steps:
1. Production Technology
2. Cost Constraints
3. Input Choices

3. The Technology of production
Factor of production- inputs of production process , include
anything that the firm used as part of the production
process.
e.g. (labour, capital and material).
How firms turns
input into
output?
• Labour-Skilled ,Unskilled,
• Materials-Steel ,Plastics , water ,
Electricity
• Capital-Land, buildings , Machinery

4. The Production Function
 Production function :- Function showing the highest
output that a firm can produce for every specified
combination of inputs.
Q=F(K,L)
this equation relates the quantity of output to the
quantities of the two inputs :- capital(K) , labor(L).
 Inputs and outputs are flow.
 Production function allows inputs to be combined in
varying proportions.
 It describes what is technically feasible when the firm
operates efficiently.

5. The Short Run versus The Long
Run
 Short run:-
Quantities of one or more production factors
can not be changed.
 Long run:-
Period where all production inputs varies.
 Fixed input:-
Production factor that cannot be varied.

6. Average and Marginal Products
Average product :- Output per unit of a particular input.
Marginal product:- Additional output produced as an input is
increased by one unit.
Average product of labor = Output/labor input = q/L
Marginal product of labor = Change in output/change in labor input
= Δq/ΔL

7. The slopes of the Product Curve
(Production with one variable input)
Where;
TP = total product
AP = average product
MP = marginal product

8. The Law of Diminishing Marginal
Returns
 law of diminishing marginal returns Principle
that as the use of an input increases with other inputs
fixed, the resulting additions to output will eventually
decrease.
The Effect of Technological Improvement
Labor productivity (output per unit of labor) can
increase if there are improvements in technology, even
though any given production process exhibits diminishing
returns to labor.

9. Production with two variable
 Isoquants Curve showing all possible combinations of
inputs that give same level of output.
 Isoquants map Graph combining a number of
isoquants , used to describe a production function