The document discusses key concepts related to production analysis including inputs, outputs, the production function, factors of production, and the concepts of total product, average product, and marginal product. It explains that production transforms inputs into outputs through processes of changing form, place, or time. The production function deals with the maximum output achievable given limited inputs. Total product is the total output, average product is output per input, and marginal product is the change in output from an additional input.
1) This document discusses various concepts related to production analysis including factors of production, production functions, laws of variable proportions, isoquants, marginal rate of technical substitution, and returns to scale.
2) The factors of production are land, labor, capital, and entrepreneurship. Production functions include fixed proportion, variable proportion, linear homogeneous, Cobb-Douglas, and constant elasticity of substitution.
3) The law of variable proportions explains how output increases at different rates as one variable input is increased while others stay fixed. Returns to scale refers to how output changes as all inputs change proportionately.
This document discusses production functions and the differences between short-run and long-run production. In the short-run, at least one input is fixed, leading to diminishing returns. The long-run allows all inputs to vary, and economies of scale can result in decreasing, constant, or increasing returns. Specifically, decreasing returns occur when output grows less than inputs; constant returns when both grow equally; and increasing returns when output grows more than inputs due to factors like specialization and large-scale machinery.
The document discusses concepts of production including factors of production, production functions, and concepts of total, average, and marginal products. It explains that production transforms inputs into outputs. A production function shows the technical relationship between physical inputs like labor and capital to the physical output. Total product is the total output from given inputs, while average product is the output per input unit. Marginal product is the change in total product from an extra input unit. The law of variable proportions states that as a variable input increases with a fixed input, total product first rises, then falls, then becomes negative.
Let's face it. At some point of time in our school or college, we face a typically difficult assignment with a tricky problem, a complex equation or a case study on an obscure concept. Do you wish you had access to a qualified tutor who could help you at that moment?
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Production function refers to the relationship between inputs used in production and the resulting outputs. It shows the technical relationship between inputs like labor, capital, land, and enterprise and the quantity of output.
There are short run and long run production functions. Short run production functions consider variable inputs while long run considers all inputs as variable.
Total, average, and marginal production are key concepts. Total production is the total output. Average production is output per unit of input. Marginal production is the change in output from a change in input.
There are laws like diminishing returns and returns to scale. Diminishing returns states that adding more of a variable input on fixed inputs initially increases output, then at a decreasing
The document discusses the theory of production from the perspectives of inputs, outputs, firms, industries, and timeframes. It covers the production function and key concepts like total, average, and marginal products of labor. It explains the three stages of production in the short run according to the law of diminishing returns. The long run production function and concepts of economies and diseconomies of scale are also summarized.
This document discusses production and production functions. It defines production as the process of transforming inputs like land, labor, and capital into outputs. A production function represents the relationship between inputs used in production and the maximum output possible. There are two types of production functions: one that considers only variable inputs in the short-run, and one that considers all inputs in the long-run. The document outlines the stages and graphical representations of the laws of variable proportions and returns to scale.
1) This document discusses various concepts related to production analysis including factors of production, production functions, laws of variable proportions, isoquants, marginal rate of technical substitution, and returns to scale.
2) The factors of production are land, labor, capital, and entrepreneurship. Production functions include fixed proportion, variable proportion, linear homogeneous, Cobb-Douglas, and constant elasticity of substitution.
3) The law of variable proportions explains how output increases at different rates as one variable input is increased while others stay fixed. Returns to scale refers to how output changes as all inputs change proportionately.
This document discusses production functions and the differences between short-run and long-run production. In the short-run, at least one input is fixed, leading to diminishing returns. The long-run allows all inputs to vary, and economies of scale can result in decreasing, constant, or increasing returns. Specifically, decreasing returns occur when output grows less than inputs; constant returns when both grow equally; and increasing returns when output grows more than inputs due to factors like specialization and large-scale machinery.
The document discusses concepts of production including factors of production, production functions, and concepts of total, average, and marginal products. It explains that production transforms inputs into outputs. A production function shows the technical relationship between physical inputs like labor and capital to the physical output. Total product is the total output from given inputs, while average product is the output per input unit. Marginal product is the change in total product from an extra input unit. The law of variable proportions states that as a variable input increases with a fixed input, total product first rises, then falls, then becomes negative.
Let's face it. At some point of time in our school or college, we face a typically difficult assignment with a tricky problem, a complex equation or a case study on an obscure concept. Do you wish you had access to a qualified tutor who could help you at that moment?
Our homework assistance service, which is available 24/7 in subjects across disciplines like Finance, Accounting, Management, Engineering, Sciences, Math and ELA, is precisely the answer to your wish.
Our tutors provide you with a step-by-step working of the solution to your homework problems so that you understand the solution and the approach better. Aiming for school/college success with top grades just got easier with Online Assignment help
It has been our constant endeavor to match the best tutoring with the most affordable price. Our tutors are highly qualified, have long tutoring experience in their respective subjects and have passed our stringent screening criteria. This makes them some of the best in the tutoring industry.
We are proud to have moved over 100,000 customers closer to their cherished goals. We would be glad to be a part of your journey too.
• Our Homework help covers detailed solutions to Assignment problems, Case studies, Project Work, Research paper writing, Essay writing and review help.
Website: www.onlineassignment.net
Mail: homework@onlineassignment.net
Live Chat Available 24*7
Regards
Online Assignment
Production function refers to the relationship between inputs used in production and the resulting outputs. It shows the technical relationship between inputs like labor, capital, land, and enterprise and the quantity of output.
There are short run and long run production functions. Short run production functions consider variable inputs while long run considers all inputs as variable.
Total, average, and marginal production are key concepts. Total production is the total output. Average production is output per unit of input. Marginal production is the change in output from a change in input.
There are laws like diminishing returns and returns to scale. Diminishing returns states that adding more of a variable input on fixed inputs initially increases output, then at a decreasing
The document discusses the theory of production from the perspectives of inputs, outputs, firms, industries, and timeframes. It covers the production function and key concepts like total, average, and marginal products of labor. It explains the three stages of production in the short run according to the law of diminishing returns. The long run production function and concepts of economies and diseconomies of scale are also summarized.
This document discusses production and production functions. It defines production as the process of transforming inputs like land, labor, and capital into outputs. A production function represents the relationship between inputs used in production and the maximum output possible. There are two types of production functions: one that considers only variable inputs in the short-run, and one that considers all inputs in the long-run. The document outlines the stages and graphical representations of the laws of variable proportions and returns to scale.
Production and cost (economics presentation)AliAkberMehedi
This document discusses production costs, including:
- It defines production functions, total, average, and marginal costs and products.
- It explains the relationships between total, average, and marginal costs and how they are impacted by changes in production levels.
- It distinguishes between short-run costs, which include fixed factors, and long-run costs, which have no fixed factors and all inputs can be varied.
This document discusses the theory of production, including production functions, inputs, fixed vs variable inputs, and the concept of marginal, total, and average product. It explains:
- Production functions relate inputs like labor, capital, and land to the output of goods and services. They can consider short or long run time frames.
- Marginal product is the change in output from an additional unit of input. It increases initially but eventually declines due to diminishing returns.
- Total product is the total output. Average product is the output per unit of input and shows efficiency. The relationship between marginal, total, and average product curves illustrates stages of production.
The document discusses Philips' brand repositioning strategy around "sense and simplicity". It outlines that Philips' products had become too complex, so the company refocused on simplicity through customer research. Key aspects of the new strategy include advanced yet easy-to-use technologies, a consistent message communicated globally, and products like Senseo coffee makers that embody the brand promise.
1. Returns to scale refers to how output changes when all factor inputs are increased or decreased by the same proportion. There are three possible phases: increasing returns, constant returns, and diminishing returns.
2. Increasing returns occur when output increases more than proportionately to the increase in inputs. Constant returns occur when output increases proportionately to inputs. Diminishing returns occur when output increases less than proportionately to inputs.
3. The three phases can be illustrated using production tables and diagrams showing the marginal product curve. Increasing returns are shown by an upward sloping curve initially, followed by a horizontal line for constant returns, and then a downward sloping line for diminishing returns.
The document discusses theories of production, including:
1. It defines production function and outlines concepts like inputs, outputs, fixed vs variable inputs, and short vs long run.
2. It summarizes the law of variable proportions and returns to scale, and how they relate to costs via concepts like economies and diseconomies of scale.
3. It provides an overview of oligopoly market structure and models for price and output determination under conditions like collusion, price leadership, and kinked demand curves.
This document provides an overview of production relationships and costs in three parts. Part 1 discusses the relationships between total product, marginal product, and average product as additional labor is added. It shows diminishing returns will eventually set in. Part 2 defines short run costs, including total, variable, and fixed costs. Variable costs increase with output while fixed costs do not. Average total costs are initially high but decrease as fixed costs are spread over more units before eventually increasing again due to diminishing returns. Part 3 will discuss long run production costs.
Production function- Law of variable proportions - Applications of Law of variable proportions - Law of returns to scale - Constant returns to scale - Increasing to returns scale - Decreasing to returns scale - Economies of scale - Internal economies of scale - External economies of scale - Cost classification
The document discusses production functions and laws of production. It explains that production involves transforming inputs like labor (L) and capital (K) into output (Q) according to the function Q=f(L,K). In the short run, one input is variable while the other is fixed, while in the long run both inputs are variable.
The law of variable proportions describes how total product increases at an increasing rate initially as more of the variable input is added with the fixed input held constant, then increases at a diminishing rate, and eventually decreases as diminishing returns set in. The law of returns to scale examines how output changes as a firm varies all inputs proportionately. Firms experience increasing, constant, and
Isoquants, MRTS, Concept of Total Product, Average & Marginal Product, Short Run and Long Run analysis of production, The Law of Variable proportion, Returns to scale,
Production Cost – Concept of Cost, Classification of Short run cost – Long run cost,
This document discusses production functions and key concepts related to production including total product, average product, and marginal product. It defines production as the process of transforming inputs into outputs. The production function shows the relationship between physical inputs and physical output. It defines total product, average product, and marginal product. Total product is the total output from a given amount of an input. Average product is total output per unit of input. Marginal product is the change in total output from an additional unit of input. The document presents examples showing how total product, average product, and marginal product change as the amount of an input (labor) is increased.
The document analyzes the production function of Tata Steel using regression analysis and correlation analysis. Regression analysis is used to estimate Tata Steel's production function from historical data collected over 8 years. The regression results show that Tata Steel's production function is capital intensive rather than labor intensive, with capital having a greater impact on production volume than labor. Correlation analysis also indicates production is more related to capital than labor. Therefore, it can be concluded that Tata Steel can increase production more by employing more capital as opposed to labor.
Theory of Production and Cost, Break-even AnalysisKumar Pawar
This document summarizes a presentation on management topics including production theory, costs, and break-even analysis. It was created by three students - Kumar Pawar, Rangat Mehta, and Jay Kheni. The presentation covers the meaning of production, production functions, factors of production, laws of variable proportions and returns to scale. It also defines fixed and variable costs, total and average costs, marginal and opportunity costs. Finally, it explains break-even analysis including the objective to find the production volume where a firm will make a profit.
production function with 2 variable inputs return to scaleNabil Ashraf
This document discusses production functions and isoquants. It defines a production function as a relationship between inputs like labor, capital, materials and time, and the output they produce. Isoquants represent combinations of two inputs that produce the same output amount. The key properties of isoquants are that they have a negative slope, are convex, do not intersect, and higher isoquants represent more output. The slope of the isoquant indicates the rate of technical substitution between inputs. The shape and spacing of isoquants can also show if a production process exhibits increasing, decreasing, or constant returns to scale.
This document discusses the three laws of returns known to economists: the law of diminishing returns, the law of increasing returns, and the law of constant returns. It provides examples and explanations of each law, how they operate in different contexts like agriculture, and the assumptions behind each law. It also discusses returns to scale and how scale of production can result in increasing, constant, or diminishing returns depending on the phase of production.
Business economics production analysisRachit Walia
The document discusses several key concepts in production analysis:
1. It defines production functions, marginal product, average product, and the law of diminishing returns. Marginal product refers to the change in output from a small change in one input.
2. It explains the relationships between total, average, and marginal productivity and how marginal productivity initially increases and then decreases.
3. There is a distinction made between short and long run periods of production - in the short run some inputs can be varied, while in the long run all inputs can be varied.
4. The concepts of economies of scale, isoquants, and marginal rate of technical substitution are also introduced at a high level.
Among several laws of production, the law of Diminishing Returns is the oldest and universal law. This law establishes a relationship between input and output and points out that with increasing input, output has a tendency to decline under certain circumstances. The classical economists associated the law of Diminishing Returns with agriculture as they thought that this law manifested in agriculture as they thought that this law manifested in agriculture (land).
The document discusses various factors of production including land, labor, capital and entrepreneurship. It then defines different types of costs businesses face such as explicit costs, implicit costs, fixed costs, variable costs, total costs, average costs, marginal costs, accounting profit and economic profit. It provides examples to illustrate the differences between these concepts.
theory of production ( EEM PPT / SEM 4 GTU )tejaspatel1997
The document provides information about the theory of production and the factors of production.
It begins with an introduction to the theory of production, defining it as the process of converting inputs into outputs. It then discusses the production function and how it represents the relationship between inputs and outputs.
The main body of the document is dedicated to explaining the four factors of production: land, labor, capital, and entrepreneurship. It provides examples and definitions for each factor.
The document concludes by discussing some concepts that influence entrepreneurial decision making, such as scarcity, opportunity cost, and productivity. It emphasizes how entrepreneurs must use resources efficiently to maximize profits.
Ram Kumar Phuyal presents on production theory and costs. He discusses production functions with one and two variable inputs and the concept of returns to scale. He explains the production function and differentiates between fixed and variable inputs. Total, average, and marginal products are defined for a single variable input. There are three stages of production as marginal product first increases, then decreases and becomes negative. Short-run costs include total fixed, variable, and total costs. Average and marginal costs are also analyzed.
Unit - IV discusses production functions and the laws of production. It explains that a production function shows the relationship between inputs like labor, capital, land and the output produced. The laws of variable proportions and returns to scale are then covered. The law of variable proportions explains how output changes when one input is varied while others stay fixed. Returns to scale looks at what happens to output when all inputs change proportionately. Economies and diseconomies of scale are also discussed.
Production and cost (economics presentation)AliAkberMehedi
This document discusses production costs, including:
- It defines production functions, total, average, and marginal costs and products.
- It explains the relationships between total, average, and marginal costs and how they are impacted by changes in production levels.
- It distinguishes between short-run costs, which include fixed factors, and long-run costs, which have no fixed factors and all inputs can be varied.
This document discusses the theory of production, including production functions, inputs, fixed vs variable inputs, and the concept of marginal, total, and average product. It explains:
- Production functions relate inputs like labor, capital, and land to the output of goods and services. They can consider short or long run time frames.
- Marginal product is the change in output from an additional unit of input. It increases initially but eventually declines due to diminishing returns.
- Total product is the total output. Average product is the output per unit of input and shows efficiency. The relationship between marginal, total, and average product curves illustrates stages of production.
The document discusses Philips' brand repositioning strategy around "sense and simplicity". It outlines that Philips' products had become too complex, so the company refocused on simplicity through customer research. Key aspects of the new strategy include advanced yet easy-to-use technologies, a consistent message communicated globally, and products like Senseo coffee makers that embody the brand promise.
1. Returns to scale refers to how output changes when all factor inputs are increased or decreased by the same proportion. There are three possible phases: increasing returns, constant returns, and diminishing returns.
2. Increasing returns occur when output increases more than proportionately to the increase in inputs. Constant returns occur when output increases proportionately to inputs. Diminishing returns occur when output increases less than proportionately to inputs.
3. The three phases can be illustrated using production tables and diagrams showing the marginal product curve. Increasing returns are shown by an upward sloping curve initially, followed by a horizontal line for constant returns, and then a downward sloping line for diminishing returns.
The document discusses theories of production, including:
1. It defines production function and outlines concepts like inputs, outputs, fixed vs variable inputs, and short vs long run.
2. It summarizes the law of variable proportions and returns to scale, and how they relate to costs via concepts like economies and diseconomies of scale.
3. It provides an overview of oligopoly market structure and models for price and output determination under conditions like collusion, price leadership, and kinked demand curves.
This document provides an overview of production relationships and costs in three parts. Part 1 discusses the relationships between total product, marginal product, and average product as additional labor is added. It shows diminishing returns will eventually set in. Part 2 defines short run costs, including total, variable, and fixed costs. Variable costs increase with output while fixed costs do not. Average total costs are initially high but decrease as fixed costs are spread over more units before eventually increasing again due to diminishing returns. Part 3 will discuss long run production costs.
Production function- Law of variable proportions - Applications of Law of variable proportions - Law of returns to scale - Constant returns to scale - Increasing to returns scale - Decreasing to returns scale - Economies of scale - Internal economies of scale - External economies of scale - Cost classification
The document discusses production functions and laws of production. It explains that production involves transforming inputs like labor (L) and capital (K) into output (Q) according to the function Q=f(L,K). In the short run, one input is variable while the other is fixed, while in the long run both inputs are variable.
The law of variable proportions describes how total product increases at an increasing rate initially as more of the variable input is added with the fixed input held constant, then increases at a diminishing rate, and eventually decreases as diminishing returns set in. The law of returns to scale examines how output changes as a firm varies all inputs proportionately. Firms experience increasing, constant, and
Isoquants, MRTS, Concept of Total Product, Average & Marginal Product, Short Run and Long Run analysis of production, The Law of Variable proportion, Returns to scale,
Production Cost – Concept of Cost, Classification of Short run cost – Long run cost,
This document discusses production functions and key concepts related to production including total product, average product, and marginal product. It defines production as the process of transforming inputs into outputs. The production function shows the relationship between physical inputs and physical output. It defines total product, average product, and marginal product. Total product is the total output from a given amount of an input. Average product is total output per unit of input. Marginal product is the change in total output from an additional unit of input. The document presents examples showing how total product, average product, and marginal product change as the amount of an input (labor) is increased.
The document analyzes the production function of Tata Steel using regression analysis and correlation analysis. Regression analysis is used to estimate Tata Steel's production function from historical data collected over 8 years. The regression results show that Tata Steel's production function is capital intensive rather than labor intensive, with capital having a greater impact on production volume than labor. Correlation analysis also indicates production is more related to capital than labor. Therefore, it can be concluded that Tata Steel can increase production more by employing more capital as opposed to labor.
Theory of Production and Cost, Break-even AnalysisKumar Pawar
This document summarizes a presentation on management topics including production theory, costs, and break-even analysis. It was created by three students - Kumar Pawar, Rangat Mehta, and Jay Kheni. The presentation covers the meaning of production, production functions, factors of production, laws of variable proportions and returns to scale. It also defines fixed and variable costs, total and average costs, marginal and opportunity costs. Finally, it explains break-even analysis including the objective to find the production volume where a firm will make a profit.
production function with 2 variable inputs return to scaleNabil Ashraf
This document discusses production functions and isoquants. It defines a production function as a relationship between inputs like labor, capital, materials and time, and the output they produce. Isoquants represent combinations of two inputs that produce the same output amount. The key properties of isoquants are that they have a negative slope, are convex, do not intersect, and higher isoquants represent more output. The slope of the isoquant indicates the rate of technical substitution between inputs. The shape and spacing of isoquants can also show if a production process exhibits increasing, decreasing, or constant returns to scale.
This document discusses the three laws of returns known to economists: the law of diminishing returns, the law of increasing returns, and the law of constant returns. It provides examples and explanations of each law, how they operate in different contexts like agriculture, and the assumptions behind each law. It also discusses returns to scale and how scale of production can result in increasing, constant, or diminishing returns depending on the phase of production.
Business economics production analysisRachit Walia
The document discusses several key concepts in production analysis:
1. It defines production functions, marginal product, average product, and the law of diminishing returns. Marginal product refers to the change in output from a small change in one input.
2. It explains the relationships between total, average, and marginal productivity and how marginal productivity initially increases and then decreases.
3. There is a distinction made between short and long run periods of production - in the short run some inputs can be varied, while in the long run all inputs can be varied.
4. The concepts of economies of scale, isoquants, and marginal rate of technical substitution are also introduced at a high level.
Among several laws of production, the law of Diminishing Returns is the oldest and universal law. This law establishes a relationship between input and output and points out that with increasing input, output has a tendency to decline under certain circumstances. The classical economists associated the law of Diminishing Returns with agriculture as they thought that this law manifested in agriculture as they thought that this law manifested in agriculture (land).
The document discusses various factors of production including land, labor, capital and entrepreneurship. It then defines different types of costs businesses face such as explicit costs, implicit costs, fixed costs, variable costs, total costs, average costs, marginal costs, accounting profit and economic profit. It provides examples to illustrate the differences between these concepts.
theory of production ( EEM PPT / SEM 4 GTU )tejaspatel1997
The document provides information about the theory of production and the factors of production.
It begins with an introduction to the theory of production, defining it as the process of converting inputs into outputs. It then discusses the production function and how it represents the relationship between inputs and outputs.
The main body of the document is dedicated to explaining the four factors of production: land, labor, capital, and entrepreneurship. It provides examples and definitions for each factor.
The document concludes by discussing some concepts that influence entrepreneurial decision making, such as scarcity, opportunity cost, and productivity. It emphasizes how entrepreneurs must use resources efficiently to maximize profits.
Ram Kumar Phuyal presents on production theory and costs. He discusses production functions with one and two variable inputs and the concept of returns to scale. He explains the production function and differentiates between fixed and variable inputs. Total, average, and marginal products are defined for a single variable input. There are three stages of production as marginal product first increases, then decreases and becomes negative. Short-run costs include total fixed, variable, and total costs. Average and marginal costs are also analyzed.
Unit - IV discusses production functions and the laws of production. It explains that a production function shows the relationship between inputs like labor, capital, land and the output produced. The laws of variable proportions and returns to scale are then covered. The law of variable proportions explains how output changes when one input is varied while others stay fixed. Returns to scale looks at what happens to output when all inputs change proportionately. Economies and diseconomies of scale are also discussed.
This document discusses production functions and costs. It defines key concepts such as:
- Production functions show the relationship between inputs and maximum possible output. Short run production is fixed capital while variable inputs can change. Long run all inputs can vary.
- Cost concepts include total, average, and marginal costs. Total cost is the sum of total fixed and variable costs. Marginal cost is the change in total cost from a one unit change in output.
- Cost curves are U-shaped as average and marginal costs initially fall then rise due to diminishing returns. Minimum points indicate optimal output levels for firms.
The document discusses production functions and costs. It defines production functions as relating physical output to inputs like labor and capital. Production functions can be expressed as short-run or long-run depending on whether inputs are fixed or variable. The document also discusses laws of returns like increasing, decreasing, and constant returns. Isoquants and isocost curves are presented, where isoquants show input combinations for a given output and isocost curves show input combinations at a given cost.
Eco 101 - The producers theory is concerned with the behavior of firms in hiring and combining productive inputs to supply commodities at appropriate prices.The theory of production is based on the "short run" or a period of production that allows production to change the amount of variable input, in this case, labor. The "long run" is a period of production that is long enough for producers to adjust various inputs to analyze the best mix of the factors of production.
This document discusses the short run production function and the law of variable proportions. It defines the short run as a period where at least one input is fixed. The production function shows the relationship between inputs like labor, capital, land, and outputs. In the short run, outputs increase at an increasing rate initially as variable inputs like labor are added, reaching a point of maximum output, after which outputs increase at a diminishing rate and can become negative. This follows the law of variable proportions, where marginal product initially increases with more variable input, then decreases and can become negative. The document provides an example of increasing wheat output with more labor on a fixed amount of land, and a graph illustrating the three stages of the law of
This document defines production and costs of production. It discusses:
- Factors of production including land, labor, capital and entrepreneurship.
- Production functions showing the relationship between inputs and outputs.
- The law of diminishing marginal returns and how it impacts total, average and marginal product.
- Short and long run production functions and the law of returns to scale.
- Cost concepts including explicit, implicit, opportunity and social costs.
- Cost curves including total, average and marginal costs in the short and long run.
- Economies of scale and how costs are impacted by scale of production.
Production involves transforming inputs like labor, machines, and raw materials into outputs. There are two types of inputs: fixed inputs whose supply is inelastic in the short run, and variable inputs whose supply is elastic. A firm's production function describes its output as a function of inputs and can be expressed as short run or long run. The law of diminishing returns states that as one variable input is increased while others stay fixed, marginal product initially increases but eventually decreases. Returns to scale refers to output changes from proportional input changes, and can exhibit increasing, constant, or diminishing returns based on the relationship between input and output changes.
The document discusses the law of variable proportions, which examines how adjusting one input while holding others constant affects total output. It begins by defining key terms like marginal product and average product. It then outlines the three stages of the law: initially increasing returns, then diminishing returns, and finally negative returns. It also lists several important conditions for the law to apply, such as constant technology, variable factor proportions, and operating in the short run. Finally, it discusses implications for costs, including how marginal cost, total cost, and variable cost change under the law of variable proportions.
This document discusses production functions and the economics of production. It begins by defining key terms like production function, total product, average product, and marginal product. It then examines a production function with one variable input (labor) and a fixed input (machine tools). As labor is increased, the total, average, and marginal products are calculated. This leads to three stages of production: stage 1 where marginal product and average product are both increasing, stage 2 where marginal product is positive but average product is constant, and stage 3 where marginal product is negative. The law of diminishing marginal returns is also explained.
The document discusses key concepts related to production theory and cost analysis. It defines production as transforming inputs into outputs. Inputs can be fixed or variable, and production functions are classified as short-run or long-run depending on whether inputs are fixed or variable. The law of diminishing returns and returns to scale are explained. Cost concepts like total, average, fixed and variable costs are introduced. Break-even analysis is defined as a technique to understand the relationship between sales, costs and profits. Key assumptions and applications of break-even analysis are also outlined.
1. Returns to scale refers to the change in total output resulting from a proportional change in all inputs.
2. There are three types of returns to scale: increasing, constant, and diminishing.
3. Increasing returns to scale occur when a 1% increase in all inputs leads to a more than 1% increase in output. Constant returns mean a proportional change in output, while diminishing returns mean output increases by less than the input increase.
The document discusses production functions and costs. It defines a production function as the relationship between inputs like labor, capital, land, and entrepreneurship and the volume of output. It describes how productivity curves show different combinations of inputs that can produce different levels of output. It also discusses concepts like economies of scale, total costs, average costs, marginal costs, and how these costs change in the short run and long run based on changes in fixed and variable inputs and output levels.
The document discusses production functions and costs. It defines a production function as the relationship between inputs like labor, capital, land, and entrepreneurship and the volume of output. It describes how productivity curves show different combinations of inputs that can produce certain outputs. It also discusses concepts like economies of scale, fixed vs variable costs, and how average and marginal costs change with different levels of output in the short run and long run.
1. Alfred Marshall distinguished between internal and external economies of scale. Internal economies occur within a firm as it increases production and reduces costs. External economies occur outside a firm, within an industry, such as when a transportation network improves and reduces costs for all firms.
2. The production function specifies the maximum output possible from different combinations of inputs, based on current technology. It represents the technological relationship but not economic choices.
3. In the long run, firms can enter or exit industries, increase or decrease plant size, and adopt new technologies. In the short run, firms can increase, decrease, or shut down production using variable inputs, with fixed inputs constrained.
This document discusses production and costs at the firm level. It begins by defining firms and their objectives to maximize profits. It then explores the production process, explaining that firms use inputs like labor and capital to produce outputs. It discusses the economists' view of costs, distinguishing between explicit costs and implicit opportunity costs. It also explains the differences between accounting profits, economic profits, and normal profits. The document then examines production functions and the laws of diminishing and increasing returns to scale in both the short-run and long-run. It provides graphs and examples to illustrate these concepts.
theory of production, Presented at GGV Bilaspur ChhattisgarhSamyakRatnakar1
This document discusses the theory of production, including definitions of key concepts like the factors of production, production function, short run vs long run, variable vs fixed factors, total product, marginal product, average product, and the stages of production. It explains the law of variable proportions graphically and describes the relationships between total product, marginal product, and average product. The key point is that a producer should aim to operate in the second stage of production, where adding more of a variable input increases total output at a diminishing rate, in order to achieve maximum output and lowest average costs.
The document discusses production functions and their key components. It defines a production function as explaining the quantitative relationship between inputs and outputs in production. There are four main components: inputs, outputs, short-run production functions where one input is variable, and long-run production functions where all inputs are variable. The document also discusses concepts like total product, marginal product, average product, the law of diminishing returns, and returns to scale.
The document provides an overview of production theory, factors of production, costs, and key economic principles.
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The factors of production - land, labor, capital, and entrepreneurship - are defined. The laws of variable proportions and returns to scale describe the relationship between inputs and outputs in the short and long-run.
Costs are classified as fixed, variable, total, average, and marginal based on their behavior. Short and long-run costs are also distinguished. Break-even analysis relates costs and revenues.
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Business Finance Chapter 11 Risk and returnTinku Kumar
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1. There is typically a reward for bearing more risk, as seen by higher average returns for asset classes like stocks compared to less risky treasury bills. However, riskier assets also experience greater variability in returns.
2. Variability, or volatility, in returns is a measure of risk. Greater variability is seen in scatter plots and frequency distributions that show a wider spread of returns for riskier assets like stocks versus less variable returns for treasury bills.
3. While history shows average returns that reward risk, the future is unpredictable and past performance does not guarantee future results, as seen from periods like 2000-2002
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1. Production Analysis
Production is transformation activity that connects factor inputs
and outputs. For example, a farmer uses land, labor and seeds as inputs
to transform them into corn. An input refers to any good or service that
assists in producing an output. A good or service may be input for one
firm, but may be output for another. For example, steel is an input for an
automobile manufacturer, but output for a steel producer.
The process of transformation of inputs to outputs can be
transformed in any of following three ways:
1} Change in form: E.g. transformation of raw materials into finished
goods.
2} Change in place: E.g. transportation
3} Change in Time: E.g. storage
2. Production Function
Production function deals with the maximum output that can be produced with
a limited and given quantity of inputs.
For example, the production function of a steel firm takes into consideration,
various inputs like labor, raw material, power consumption, cost of land, etc. It also takes
into account the quantity of output that is being produced, using all the above fixed and
variable inputs. Thus, production function deals with input as well as output. A
production function can be expressed as an equation, table, or a graph.
If a firm uses inputs like labor (L) and capital (K), then the production function can be
formed as
Q = f (K, L)
Production function has no focus towards the least cost combination or the
profit maximization.
If the firm fails to utilize the available resources effectively, it may not be able to
survive in the long run. Firms using the efficient production processes enjoy minimum
cost but earn maximum profits.
Example:
The production function of a steel company can have inputs like cost of
procuring the ore, power charges, labor charges, etc. Whereas the production function of
a tour operator can be cost of fuel, vehicle maintenance charges, wages and salaries of
employees
3. Factors
Factors that are used for production are called factors of
production. There are four important factors of production. They are –
Land
Labor
Capital
Entrepreneurship
The prices of these factors are rent, wage, interest and profit
respectively.
Factor of Production Price
Land Rent
Labor Wage
Capital Interest
Entrepreneurship Profits
4. Concepts of Product
There are three types of product concepts that are crucial to the
production function.
Total product
Marginal product and
Average product.
5. Total Product, Average Product and Marginal
Product
Total product
The amount of output produced using a given quantity of inputs is
known as total output. As the input increases, the total output also increases. For
example, for a firm producing leather shoes, as the number of labor and the raw
material is increased, output also increases. When the firm is using just a single
labor the firm produces 2,000 units of shoes. On increasing the labor to three, the
total output rises to 3,000.
It can be observed that total product increases with the increase in the
output, and rate of increase starts decreasing after reaching a point, which it can
be observed in the TP graph as well. It can be seen in the graph that the total
product rises by smaller and smaller increments as additional units of labor are
added. TP curve rises initially and starts declining after reaching a point.
6. Average product
Average product can be defined as the total product per unit of factor
employed in the production process. In the given example, average product is 2000
with one labor, every additional labor has resulted in the fall in the average product.
Marginal product
Marginal product can be defined as the extra product or output added by one extra
unit of that input while other inputs are held constant. In the given example, it can
be seen that the first labor can produce 2000 units of shoes alone, i.e. the marginal
product of the first labor is 2000. On adding one more unit of labor, total product
increases to 3,000, resulting in decline in the marginal product. With addition of
each labor unit, marginal product keeps declining. When the 6th labor unit is added,
marginal product becomes negative.
Marginal product helps in determining the wages of the labor. Based on the
marginal product, the firm can arrive at the cost and output relationship of each
additional labor. The concept of marginal product also helps a firm to allocate the
scarce resources of the firm. For example, in the given case a firm could have
avoided adding the 6th labor, as it is resulting in the fall of total product itself.
7. The Three Stages of Production
Based on the law of diminishing returns, Prof. Cassels proposed three
stages in the production process.
Stage I: Stage I offers increasing average returns to the factor of
production, i.e. (Q/L)/ðL > 0 or MPL > APL. Thus, in stage I, average
product increases and the marginal product is greater than the
average product.
Stage II: In stage II, the average product decreases and so does the
marginal product. But marginal product remains positive. This stage
may be called the stage of decreasing returns.
Stage III: In stage III, total product decreases and the marginal
product becomes negative.
9. Points to Remember
When MP = AP, AP will be maximum
When MP = 0, TP will be maximum
Stages of Marginal Returns
Increasing marginal returns: From the starting point of MP
until MP reaches its maximum point.
Diminishing marginal returns: From the maximum point of
MP until MP = 0.
Negative marginal returns: From the point where MP = 0
10. Short Run and Long Run
Time period can be classified into short run and long
run based on the nature of factors of production.
Short run refers to a period of production where all factors of
production are not variable. The period defers from industry
to industry, country-to-country, and firm-to-firm, etc.
Example:
Matchbox industry : 1 day
Soap industry : one year
Shipbuilding industry : 10 years
Long run refers to a period of production where all factors of
production are variable.
11. Products Costs in the Short Run
(Law of Diminishing Returns)
In the short run, the shape of the total product (TP) curve is determined
by the law of diminishing returns. Law of Diminishing Returns (also known
as Law of Variable Proportions) states that given the state of technology, if
we go on employing more of one factor of production, other things
remaining the same, its marginal productivity will diminish after some
point.
Assumption
Law of diminishing returns is based on the following assumptions.
State of technology is constant.
One factor of production must always be fixed. Thus, this law is not
applicable when all the factor inputs are variable.
This law is not applicable when the two inputs are used in a fixed
proportion. This amounts to say that the law is applicable only to varying
ratios between the two inputs.
12. Product Costs in Long Run
Law of diminishing returns is operational only in short run because of its
assumption of one fixed factor input. But in the long run all the factor inputs are
variable.
Law of Returns to Scale: It refers to the long run analysis of production.
According to the law, the long run output can be increased by changing all the factors
in the same proportion, or by different proportions.
As all factor inputs are variable in the long run, the production function is
given by
Q = f (K, L)
The returns to scale may be of three types –
Constant returns to scale
Decreasing returns to scale
Increasing returns to scale
13. Types of Returns to Scale
a.Constant Returns to Scale: If the proportionate change in output
is same as the proportionate change in input, then we say that there
are constant returns to scale (CRS). Symbolically,
CRS: % ΔQ = %ΔI
b.Decreasing Returns to Scale: If the proportionate change in
output is less than the proportionate change in input, then we say that
there are decreasing returns to scale (DRS).
DRS: %ΔQ < %ΔI
c.Increasing Returns to Scale: If the proportionate change in output
is more than the proportionate change in input, then we say that there
are increasing returns to scale (IRS).
IRS: %ΔQ > %ΔI
14. Returns to Scale
Returns to scale show the responsiveness of total product when all the
inputs are increased proportionately. Returns to scale is a factor that is studied
in the long run. Returns to scale can be constant, increasing or decreasing.
Constant returns to scale:
In this case, the change in inputs results in proportional change in output.
For example, if a firm is using three factors of production, land, labor and
capital, and if it doubles all these inputs, output should also be doubled.
15. Increasing returns to scale:
When rise in inputs result in more than proportional increase in the output,
it is known as increasing returns to scale.
For example, if a plant is producing 100 units of the product using 10 units
of labor and 100 units of capital. If the labor is doubled to 20 units and
capital is also doubled to 200 units, and the output generated is 250 units,
then the firm is operating at increasing returns to scale level.
Decreasing returns to scale:
When increase in all the inputs result in less than proportional increase in
output, then it is known as decreasing returns to scale.
For example, if a firm increases all its inputs by 20 percent and the resulting
increase in the output is just 15 percent, then it is the case of decreasing
returns to scale.
16. The Production Isoquant
If a firm is having two variable inputs, the approach to determine the
optimal input rates is completely different. In this scenario, the problem of efficient
resource allocation can be solved in two ways.
Maximize the production, utilizing the available resources. These two
problems are known as constrained optimization problems. The problem of
resource allocation can also be solved by producing the profit maximizing output.
Isoquants also known as production-indifference curves, represent the
combinations of inputs that produce same quantity of output. This can be explained
with the help of an example,
Factor
Labor Capital
Combinations
A 2 24
B 4 16
C 6 10
D 8 6
E 10 4
17. Characteristics of an Isoquant Curve
The properties of an isoquant are similar to that of an
indifference curve.
The following are the important properties of an isoquant
curve.
1) Isoquant curve will be downward sloping: The level of
output is same along the isoquant curve. Thus, if a firm uses
more of one input, it must use less of another input to attain
the same level of output.
2) An isoquant curve is convex to the origin:
3) Two isoquant curves cannot intersect each other. Like
indifference curves isoquant curves too do not intersect each
other.
4) Isoquant Map: A higher isoquant curve gives higher
level of output
18. Convexity
The slope of the isoquant curve measures the marginal rate of technical
substitution (MRTS) as it shows the rate at which one input can be substituted
with another. The slope of isoquant curve diminishes or becomes flatter as we
move from point j to m. This implies that we can substitute lesser and lesser
amount of K for L as we move down the curve. This is because of the operation of
law of diminishing returns.
19. Isoquant Map
In the figure, each isoquant curve reflects a difference level of output. As we
move from the original, each successive isoquant curve reflects a higher level
of output. This is because at a higher isoquant curve we use more of both L and
K, which means more output.
20. Expansion Path
We know that a rational firm, to maximize its output
subject to cost constraint, employs factor inputs in a proportion
such that marginal rate of technical substitution (MRTS) is equal
to factor price ratio.
Given the factor prices, we can get a number of parallel
isocost lines by varying the cost constraint. Each isocost line is
tangent to one isoquant curve. The locus of all such points of
tangencies between the isoquants and isocost lines forms the
expansion path of the firm. The points on the expansion path are
the most efficient combinations of the two inputs.
As all factors of production are variable in the long run,
the firm moves along the expansion path to expand its level of
output, given the factor prices.