6. PRODUCTION FUNCTIONS
A Production Function can be an equation ,
table or graph presenting the maximum
amount of a commodity that a firm can
produce from a given set of in puts during
a period of time.
9. The Production Functions can be
mathematically written as
Q = f(X1,X2……..Xk)
Where;
Q=Out put
X1,…Xk=Inputs
For our current analysis ,let’s reduce the inputs to two
capital (K) and Labor (L)
Q=f(L,K)
10. How to Obtain the maximum out put.
Helps the producers to determine
whether employing variable in
puts /cost are profitability.
Highly useful in long run decision.
Least cost combination of in puts and to
produce an out put.
13. FIXED INPUTS :
Fixed inputs are those factors the
quantity of which remains constant
irrespective of the level of out put
produced by a firm .for example land,
building, machines ,tools, equipments ,
superior types of lobar top management
etc…
14. VARIOBLE OUT PUTS :
Variable out puts are those factors the
quantity which various with variations
in the level of out fut. produce d by
a firm .for example raw material ,power
fuel ,water, transport lobar ,and
communication, etc…
16. DEFINITIONS:
The AP of the input is the TP divided by the amount
of input used to produce this amount of output. AP
is the output –input ratio for each level of variable
input usage.
17. DEFINITIONS:
The MP of in put is the addition to
TP resulting from the addition of the
unit ,when the amount of other inputs
are constant
18. REALATIONSHIP BETWEEN AP&MP
When AP riser as a result of an increase in the
quantity of variable input, MP is more then the
average product .
When AP are maximum the MP is equal to AP
.The MP curve cuts the AP carve at its maximum .
When AP falls as a result of decrease in
quantity of variable input, MP is less then the AP.
23. ANALYS PRODUCTION
FUNCTIONS: Short Run
In the short run at least one factor be fixed
in supply but all other factors are capable of
being changed.
Reflect s ways in which firms respond
to changes in out put .(DEMOND)
Can increase or decrease output
using more or less of some factors .
Increase in total capacity
only possible in long run
24.
25.
26.
27.
28. ANALYSING THE PRODUCTION
FUNCTION: Long Run
The Long Run is defined as the period of time taken
to vary all factors of production.
•By Doing this ,the firm is able to increase
it ‘s total capacity –not just short term capacity
•Associated with a change in the scale of
production .
•The period of time varies according to
The firm and the industry .
29.
30.
31. THREE STAGES OF PRODUCTION
Stage 1: The Law in Increasing Returns.
Stage2: The Law of Diminishing Returns.
Stage3: The State of Negative Returns.
32. Stage 1: The Law in Increasing Returns.
TP in creases at an increasing rate up to a
point F.
MP also rises and is maximum at point F.
AP goes on rising .
After point F ,TP rises but at diminishing rate.
MP falls but is positive .Stage 1. ends where
AP reaches its highest point. z
33. Stage2: The Law of Diminishing Returns.
TPContinues to increase at a diminishing
rate , unit it reaches it maximum point H.
Both MP and AP .Continuously fall
during this stage .
Stage ends when TPreaches its
maximum point H.
34. Stage3: The State of Negative Returns
Declines .
Negative.
is Diminishing.
35.
36. A rational producer will never produce in
, where is .
A rational producer will also not produce in
where the is fixed factor is
.
37. A rational producer will produce in
, Whare Both and of
varioble factors are diminishing.
The produce producing in will
not be making best use of fixed factor
and he will not be utilizing fully the
opportunity of increasing production by
increasing quantity of variable factor .
38.
39. :
Mllikarjuna ‘s shop is
vary popular and stocks
are kind of good – from
rice and wheat to process
food imported
chocolates and cheese se.
there is small section
which has a photocopying
machine and std booth .
Mr. Mallikarjuna runs
the shop with the help of
his children .
40. :
The family
noticed that the
number of shoppers
varied between
times and days (see
Table).
During week days
Mr .Mallikarjuna
could manage with
his children ,but not
in week ends.
50 40 65
SATERDAY
-SUNDAY
165 85 30
41. :
Sunday morning buyers where ‘value could
–bulk buyers ,spent extra on something new
and attractive but wanted a pleasant
experience and were upset at the
overcrowded shop.
At certain times there were not many
shoppers.
42. :
He employed 3 assistants during week ends ,but
that did not solve the problem as the shop had a
small floor area and only one billing machine
1.Can you explain Mallikarjuna ‘s problem in
terms of law of variable proportions ?
2.Suggest in details how he can improve the
functioning of a shop .
