This PPT on production

1. PRODUCTION FUNCTION AND
RETURN TO A FACTORS

2. I would like to express my special gratitude and thanks to my
economics teacher Mrs. Sapna Ailani Mam who always gave me
valuable suggestions and guidance during the project. As well as I
would also like to thank our principal. I learned a lot of new
things by doing this project, so I am very grateful to them.
Also, I am thankful to my parents and friends for their help and
support to complete this project within the limited time.
ACKNOWLEDGEMENT

3. This is to certify that Ayush, Aditya, Suryansh, Vishal,
Uday, Arjun, Rishab of class 11 has successfully completed the
Economics Project on Production Function and Return to a
Factors as per the guidelines of class 11 Board examination
conducted by CBSE.
Teacher’s Signature: ___________________
CERTIFICATE

4. 1. Concept of Production Function
2. Fixed Factors
3. Variable Factors
4. Short run production function
5. Long run production function
6. Difference
7. Total Product
8. Marginal Product
9. Average Product
10. Negative MP
11. Law of Variable Proportion
12. Cause of increasing return
13. Cause of diminishing return
14. Relation between TP and MP
15. Relation between AP and MP
CONTENTS

5. A production function is a concept in economics that describes the
relationship between inputs and outputs in the production process of
goods and services. It represents the technological or physical
relationship between the factors of production and the quantity of
output produced.
The typical components of a production function include:
Inputs or Factors of Production:
Labor (L): The total hours or number of workers employed.
Capital (K): The machinery, equipment, buildings, and other physical
assets used in production.
Output (Q):
The quantity of goods or services produced.
CONCEPT OF PRODUCTION
FUNCTION

6. Definition: Fixed factors are those the application of which does
not change with the change in output. Thus, a machine is there
even when output is zero.
Characteristics:
Fixed factors are typically associated with the short-term production process.
The quantity of fixed factors remains constant regardless of the level of output.
Examples of fixed factors include machinery, buildings, etc.
FIXED FACTORS

7. Definition: Variable factors are inputs that can be easily adjusted
or varied in the short run to change the level of production.
Characteristics:
The quantity of variable factors can be changed in response to changes in the
level of output.
Examples of variable factors include labor and raw materials .
VARIABLE FACTORS

8. Short run is a period of time when production can be increased
only by increasing the application of variable factors. Feed factors
remain constant. The short period is too short to change it.
Qx = f(L,K)
Here, Qx =output of commodity
L = labour a variable factor
K = equal to capital A fixed factor
SHORT RUN PRODUCTION
FUNCTION

10. Long run is a period of time where all factors are variable factors.
Long periods are long enough to increase the production capacity
of a firm. Thus, what is fixed factor during the short period
becomes variable factor over the long period.
Qx = f (L,K)
[Note that K is not indicated by K]
LONG RUN PRODUCTION
FUNCTION

12. (i) It is a production function in
which factor ratio tends to change
with change in the volume of output.
(ii) Output is increased by increasing
the application of one variable factor
only.
(iii) Scale of output remains
constant.
(iv) Short period production function
is studied with reference to 'Returns
to a Factor'.
i) It is a production function in
which factor ratio does not change
with change in the volume of output.
(ii) Output is increased by increasing
the application of all factors.
(ii) Scale of output tends to change
with the change in the level of
output.
(iv) Long period production function
is studied with reference to 'Returns
to Scale'.
Short Period Long Period
THE DIFFERENCE

13. Total Product is some total of output produced by all units of a
variable factor along with some constant amount of fixed factor
used in the process of production.
T. P (total product) is also called TPP (total physical product)
TOTAL PRODUCT (T.P)

14. Marginal Product the first to change in TP when one more unit
of variable factor is used (fixed factor remains constant)
MPn = TPn – TPn-1
M.P (marginal product) is also called MPP (marginal physical
product)
MARGINAL PRODUCT(M.P)

15. Average product is output per unit of variable factor.
It is estimated as:
AP =TP/L
A.P (average product) is also called APP (average physical
product).
AVERAGE PRODUCT(A.P)

16. Yes MP can be negative in certain situations. Particularly
where there is excessive employment (disguise
unemployment) as in some public sector undertaking in
India. Excessive employment (employment of workers
more than required) reduces over all efficiency of
workers, because of which MP may be negative. In such
situations, TP increases when some workers are
withdrawn.
NEGATIVE M.P

17. Law of variable proportion states that as more as more of
variable factor is combined with fixed factor, marginal product of
variable factor may initially rises, but eventually the situation must
come when marginal product of variable factor starts declining.
In fact as a stage may come when MP becomes zero or even
negative.
THE LAW OF VARIABLE
PROPORTIONS

18. Unit of
Land
Units of
Labour
Total
Product
Marginal
Product
1 1 2 2
1 2 5 3
1 3 9 4
1 4 12 3
1 5 14 2
1 6 15 1
1 7 15 0
1 8 14 -1
LAW OF VARIABLE PROPORTION
-- INCREASING RETURN, DIMINISHING RETURN, AND
NEGATIVE RETURN
Increasing
return
Diminishing
return
Negative
return

20. Division of labour and increase in efficiency:
additional application of variable factor enables process
based division of labour. Specialized workers may be
used for different processes of production. This
increases efficiency or productivity of variable factors.
Better coordination between the factors: so long as
it factor remain under utilized, additional application of
variable factors tends to improve the degree of
coordination between the fixed and variable factor.
CAUSE OF INCREASING RETURN

21. Imperfect factor substitutability : factors of
production of perfect substitute for each other. Moral
mole of labour cannot be continuously used in place of
capital.
Poor coordination between the factors: increasing
application of variable factors eventually disturbed the
ideal factor ratio. This results in poor coordination
between the fixed and variable factor.
CAUSE OF DIMINISHING RETURN

22. Unit of
Land
Unit of Variable
Factor
M.P T.P(=ΣMP) AP(=TP/L)
1 0 -- 0 --
1 1 6 6 6
1 2 14 20 10
1 3 28 48 16
1 4 24 72 18
1 5 8 80 16
1 6 4 84 14
1 7 0 84 12
1 8 -4 80 10
RELATION BETWEEN
T.P & M.P AND A.P & M.P

24. I. So long as MP is increasing TP is increasing at increasing
rate.
II. When MP started diminishing, TP increased only at
diminishing rate.
III. When MP is zero, then TP is at its maximum.
IV. When MP is negative, TP starts declining.
RELATION BETWEEN TP & MP

25. I. AP increases so long as MP AP.
II. AP decreases when MP AP.
III. AP is added maximum when AP MP.
IV. MP may be zero or negative, but AP continues to be positive.
RELATION BETWEEN AP & MP

26. I have taken helps from the following sites :
Google
Chatgpt
Also form the following:
Microecomics Book
Our Subject Teacher
BIBLIOGRAPHY

27. I would like to convey my sincere thank to my economic
teacher Sapna Mam who give us valuable suggestion and
guidance during the project. She has a source of
inspiration and helped us understand and remember
details of this project. She gave us an amazing
opportunity to do this wonderful project.
THANKS YOU