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. BY – ABHINAV SINHA (BBA)

2. PRODUCTION
 PROCESS OF TRANSFORMING OUTPUTS INTO INPUTS
FOR EXAMPLE :-
 LAND INTO RENT
 LABOUR INTO WAGES
 CAPITAL INTO INTEREST
 ORGANIZATION INTO PROFIT
 MANAGER INTO SALARY

3. WHAT IS PRODUCTION……????
 IT IS FUNCTION OF ITS INPUTS i.e. LAND , LABOUR
, CAPITAL , etc .
 IT IS A RELATIONSHIP BETWEEN PHYSICAL INPUTS
& OUTPUTS .
 IT IS THE AMOUNT OF OUTPUT THAT CAN BE
PRODUCED GIVEN QUANTITIES OF INPUTS
DURING A GIVEN PERIOD OF TIME .

4. FACTORS OF PRODUCTION
 FACTORS OF PRODUCTION ARE DIVIDED INTO TWO
CATEGORIES BASED ON TIME :-
 VARIABLE FACTORS
 FIXED FACTORS

5. VARIABLE FACTORS
 FACTORS OF PRODUCTION THAT CAN BE CHANGED
WITH LEVEL OF OUTPUT .
 EXAMPLE – LABOUR .

6. FIXED FACTORS
 FACTORS OF PRODUCTION THAT CANNOT BE
CHANGED WITH THE LEVEL OF OUTPUT .
 EXAMPLE – LAND & CAPITAL .

7. TYPES OF PRODUCTION FUNCTION
 THERE ARE TWO TYPES OF PRODUCTION
FUNCTION :-
 PRODUCTION FUNCTION WITH VARIABLE FACTORS.
 PRDUCTION FUNCTION WITH ALL FACTORS OF
PRODUCTION.

8. PRODUCTION FUNCTION WITH
VARIABLE FACTORS
 IT IS THE RELATIONSHIP BETWEEN THE VARIABLE
FACTORS AND THE PRODUCTION .
 WHEN IT IS TAKEN INTO ACCOUNT IT IS CALLED
PRODUCTION WITH VARIABLE FACTORS .
 IT IS A SHORT TERM PHENOMENON AND IT IS ALSO
CALLED “LAW OF VARIABLE PRPORTIONS” .

9. PRODUCTION FUNCTION WITH ALL
FACTORS OF PRODUCTION
 IN THIS BOTH FIXED & VARIABLE FACTORS OF
PRODUCTION FUNCTION ARE TAKEN INTO
ACCOUNT , TO ESTABLISH THE RELATIONSHIP WITH
THE PRODUCTION .
 IT IS A LONG TERM PHENOMENON AND IS ALSO
CALLED “LAW OF RETURNS TO SCALE”.

10. ASSUMPTION OF PRODUCTION
FUNCTION
 THE TECHNOLOGY IS GIVEN AT CONSTANT .
 LABOUR IS VARIABLE FACTOR ALL OTHERS FACTORS
ARE CONSTANT .
 POSSIBILITY OF CHANGING THE PROPORTION OF
VARIOUS INPUTS WHICH ARE COMBINED TOGETHER
 ALL VARIABLE FACTORS ARE HOMOGENOUS IN
NATURE .
 APPLICABLE ONLY IN SHORT RUN.
 PRODUCT IS MEASURED IN TERMS OF UNIT ONLY .
 THE PRICE OF PRODUCT & INPUT IS FIXED &
CONSTANT.

11. LAW OF VARIABLE PROPORTIONS
 IT IS A SHORT-TERM CONCEPT .
 PRODUCTION OF A COMMODITY CAN BE
INCREASED BY INCREASING THE NUMBER
VARIABLE INPUTS WHERE FIXED FACTORS ARE
CONSTANT .
 INCREASE IN NUMBER OF OUTPUTS CHANGES THE
RATIO BETWEEN VARIABLE & FIXED INPUTS
 THIS SITUATION IS CALLED THE “LAW OF
VARIABLE PROPORTIONS”.

12. DIFFERENCE BETWEEN LAW OF VARIABLE
PROPORTIONS & LAW OF RETURNS TO SCALE
LAW OF VARIABLE
PROPORTIONS
LAW OF RETURNS TO
SCALE
 IN THIS INPUT & OUTPUT
RELATIONSHIP ARE
STUDIEDWITH ONE
VARIABLE & OTNERS ARE
FIXED.
 STAGES ARE NEGATIVE
INCREASING &
DECREASING.
 PRICES ARE FIXED.
 TECHNOLOGY IS FIXED &
UNCHANGEABLE
 IN THIS ALL INPUTS ARE
VARIABLES.
 STAGES ARE
INCREASING,DECREASING
& CONSTANT RETURNS.
 PRICES ARE CHANGEABLE .
 TECHNOLOGY IS
CHANGEABLE & WE CAN
CHANGE TECHNOLOGY IS
ACCORDING TO THE NEED.

13. GRAPHICAL REPRESENTATION OF
LAW OF VARIABLE PROPORTIONS

14. PROPERTIES OF LAW OF VARIABLE
PROPORTIONS
 INITIALLY TP , MP , AP ALL INCREASES.
 MP CUTS AP FROM ABOVE WHERE AP IS
MAXIMUM & TP REMAINS INCREASING.
 WHEN TP BECOMES MAXIMUM MP BECOMES
ZERO WHILE TP FALLS.
 TP , MP , AP START FALLING WHERE TP & AP ARE
POSITIVE WHILE MP BECOMES NEGATIVE .

15. STAGES OF LAW OF VARIABLE
PRPORTIONS
 STAGE OF INCREASING RETURNS.
 STAGE OF DECREASING RETURNS.
 STAGE OF NEGATIVE RETURNS.

16. GRAPHICAL REPRESENTATION OF
LAW OF RETURNS TO SCALE

17. STAGES OF LAW OF RETURNS TO
SCALE
 INCREASING RETURNS TO SCALE.
 CONSTANT RETURNS TO SCALE.
 DECREASING RETURNS TO SCALE.