Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Production Function

3,255 views

Published on

its use full to students of management

Published in: Business, Technology
  • Be the first to comment

Production Function

  1. 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. 2. T WO A SPECTS OF P RODUCTION: <ul><li>1. COST ANALYSIS </li></ul><ul><li>2. REVENUE ANALYSIS </li></ul>
  3. 3. COST ANALTSIS <ul><li>SHORT RUN COST </li></ul><ul><li>FIXED FACTORS </li></ul><ul><li>VARIABLE FACTORS </li></ul><ul><li>2. LONG RUN COST </li></ul>
  4. 4. TYPE OF COST IN SHORT PERIOD <ul><li>FIXED COST </li></ul><ul><li>FIXED COST CAN NEVER ZERO </li></ul><ul><li>TFC REMAIN FIXED </li></ul><ul><li>AFC WILL GO ON DIMINISHING </li></ul>AFC=TFC/OUTPUT
  5. 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. 6. VARIABLE COST <ul><li>VARIABLE COST CAN BE ZERO </li></ul><ul><li>TVC INCREASES OR DECREASES </li></ul><ul><li>AVC DIMINISHING UPTO A POINT THEN INCREASING </li></ul>AVC=TVC/OUTPUT
  7. 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. 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. 9. R EVENUE A NALYSIS REVENUE ANALYSIS TOTAL REVENUE AVERAGE REVENUE MARGINAL REVENUE

×