2. INTRODUCTION
The production function expresses a functional
relationship between physical inputs and physical
outputs of a firm at any particular time period.
Production Implies transformation of inputs into
outputs.
3. ANGLES OF PRODUCTION PROCESS
Angle 1 Angle 2
Physical process Human Action
Process of
Production
Engineers or
Technologists
Economists
4. FACTORS OF PRODUCTION
Land and other resources
Labor
Capital
Technology
Information
Production Function
Q = f L,L,C,T,I….
5. ASSUMPTION OF PRODUCTION FUNCTION
The production function is related to a particular
period of time.
There is no change in technology.
The producer is using the best techniques
available.
The factors of production are divisible.
Production function can be fitted to a short run or to
long run.
6. TYPES OF PRODUCTION FUNCTION
Short run production function
Long run production function
I Short run production function
Law of variable proportion
Iso quants and Iso costs
II Long run production function
Increasing returns
Decreasing returns
Constant returns
7. LAW OF VARIABLE PROPORTION
The law of variable proportions which is a new
name given to old classical concept of “Law of
diminishing returns has played a vital role in the
modern economics theory.
Assumptions:
The state of technology remains constant. If there is any
improvement in technology, the average and marginal output will
not decrease but increase.
Only one factor of input is made variable and other factors are
kept constant.
All units of the variable factors are homogenous.
8. LAW OF VARIABLE PROPORTION
Fixed factor Variable factor
(Labour)
Total product Average
Product
Marginal
Product
1 1 100 100 - Stage I
1 2 220 120 120
1 3 270 90 50
1 4 300 75 30 Stage
II
1 5 320 64 20
1 6 330 55 10
1 7 330 47 0 Stage
1 8 320 40 -10 III
10. ISO QUANT AND ISO COST
The term Isoquants is derived from the words “iso”
and “quant” –Iso means equal and quant implies
quantity. Isoquant therefore, means equal quantity.
Isoquants are the curves, which represent the
different combinations of inputs producing a
particular quantity of output. Any combination on
the Isoquant represents the some level of output.
For a given output level firm’s production become
Q= f (L, K)
14. ISO COST
An isocost line (equal-cost line) is a Total Cost of
production line that recognizes all combinations of
two resources that a firm can use, given the Total
Cost (TC). Moving up or down the line shows the
rate at which one input could be substitute
Let us suppose. The producer can produces the
given output of paddy say 100 quintals by
employing any one of the following alternative
combinations of the two factors labour and capital
computation of least cost combination of two inputs.
