Beruflich Dokumente
Kultur Dokumente
Production
Production function
Inputs
Classification of inputs
Short run :The time period during which
at least one input is fixed.
Long run:The time period during which
all inputs are variable.
PRODUCTION Function
Production functions demonstrate
the relationship between the
amounts of inputs and the quantities
of output that a firm produces.
Q=f(a,b,c.)
Total Product
(TPL)
Average
Product (APL)
Marginal
Product (MPL)
0
1
2
3
4
5
6
7
8
9
0
20
50
90
120
140
150
155
155
150
20
25
30
30
28
25
22
19.375
17
20
30
40
30
20
10
5
0
-2
6
Assumptions to Law of
Diminishing Returns
(a) State of technology should remain
constant
(b) Only one factor should be variable
(c) Inputs should not be used in a fixed
proportion
Total Product
TPL
A
L1
L3
Average
Product and marginal
product
Negative
marginal
returns
Diminishing
marginal
returns
A
L1
APL
L2
L3
MPL
10
Increasing Decreasing
marginal marginal
product
product
Negative
marginal
product
Labor
Points to Remember
TPL
product
II
III
APL
MPL
13
II
ND
Stage of Production
Total product is
decreasing and
marginal product is
negative.Entrepreneur
will operate in the
second stage only.
(2)
(3)
(4)=(2) (3) (5)
Marginal Marginal MRP
MRC=w
Product revenue
=P
10
40
20
10
30
20
10
20
20
10
10
20
10
20
20
Description
% Q = %I
% Q > %I
% Q < %I
21
IRS
CRS
DRS
FACTORS OF PRODUCTION
22
Labour(L)
Total Product
APL
MPL
12
14
2.5
15
2.5
14
1 1/3
-2
Test Yourself
6.
a.
b.
c.
d.
Test Yourself
5.
5.
a.
a.
b.
b.
c.
c.
d.
d.
The
The short
short run
run is
is the
the
time
time period
period in
in which
which all
all inputs
inputs are
are
variable.
variable.
time
time period
period in
in which
which all
all inputs
inputs are
are
fixed.
fixed.
time
time period
period in
in which
which at
at least
least one,
one, but
but
not
not all,
all, inputs
inputs are
are fixed.
fixed.
planning
planning horizon.
horizon.
Units of K
6
5
4
Units of Output
122
174
213
244
3
2
1
112
100
87
71
50
158
142
122
100
71
194
173
150
122
87
224
200
173
142
100
250
224
194
158
112
274
244
213
174
122
2
Units of L
274
300