This document discusses returns to factors, also known as factor productivity. It defines productivity as the ratio of output to input, and factor productivity as the short-run relationship between inputs and outputs. It then explains that productivity can be measured through total productivity, average productivity, and marginal productivity. Finally, it states that returns to factors are governed by laws of returns to scale, where total physical product increases with inputs but the rate of increase varies and eventually declines due to the laws of increasing and decreasing returns to scale.

1. Dr.K.Baranidharan
Present by…

2. Engineering
Economics &
Financial
Accountingment
Ee&fa
218 August 2013

3. Return to factors
 Returns to factors are also called
factor productivity.
 Productivity is the ratio of output to
the input.
 Factors productivity refers to the
short-run-relationship of input
and output
3

4.  The change of productivity can be measured in
terms of
 A)TOTAL PRODUCTIVITY: the total output
generated at varied levels of input of a particular
factor (while other factor remain constent) is called
the total physical product.
 B)AVERAGE PRODUCTIVITY: the total physical
product divided by the number of that particular
factor used ‘yields average productivity.
 C)MARGINAL PRODUCTIVITY: the marginal
physical product is the additional output generated
by adding an additional unit of the factor under
study, keeping the other factors constant
4

5.  The “returns to factors” is also governed
by the laws of returns to scale.
 The total physical product increase with
an increase in inputs.
 However, the rate of increase is varied, not
constant.
 To began with, the total physical product
increase at an increasing rate because of
the Law of Increasing Returns to
scale, and later decline of the Law of
Decreasing Return to Scale
5

6. Dr.K.Baranidharan
THANK YOU

7. THANK YOU!!
7