law of variable proportions and returns to scale pdf

Law Of Variable Proportions And Returns To Scale Pdf

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The functional relationship between physical inputs and physical output of a firm is called production function.

Diminishing returns , also called law of diminishing returns or principle of diminishing marginal productivity , economic law stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output. In the classic example of the law, a farmer who owns a given acreage of land will find that a certain number of labourers will yield the maximum output per worker. If he should hire more workers, the combination of land and labour would be less efficient because the proportional increase in the overall output would be less than the expansion of the labour force.

Production – CBSE Notes for Class 12 Micro Economics

The functional relationship between physical inputs and physical output of a firm is called production function. Production is also defined as 'transformation of physical inputs into physical output. There is direct relationship between the amount of inputs such as land, labour, machinery etc. Thus production function shows relationship between physical inputs and physical output. Algebraically, it can be expressed as below presuming there are three factor inputs : labour L , capital K and Land D.

The equation tells that output is a function of labour, capital and land. Mind, with given technology different levels of output can be produced using given resources. Thus production function gives information regarding maximum amount of output that can be produced from different quantities of factor inputs with given technology per period of time.

In short 'a production function is an expression of relationship between change in inputs and the resultant change in output'. Again note that production function does not tell about price and cost of output but describes a purely technical relationship between physical inputs and output. Mind, product or output or production means the volume of goods and services produced by a firm with given inputs.

The production function showing relationship between inputs and output can be explained in terms of total product i.

Production

In economics, production theory explains the principles in which the business has to take decisions on how much of each commodity it sells and how much it produces and also how much of raw material ie. It defines the relationships between the prices of the commodities and productive factors on one hand and the quantities of these commodities and productive factors that are produced on the other hand. Production is a process of combining various inputs to produce an output for consumption. It is the act of creating output in the form of a commodity or a service which contributes to the utility of individuals. The Production function signifies a technical relationship between the physical inputs and physical outputs of the firm, for a given state of the technology.

Principles and Theories of Micro Economics. Definition and Explanation of Economics. Theory of Consumer Behavior. Indifference Curve Analysis of Consumer's Equilibrium. Theory of Demand. Theory of Supply.

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Diminishing returns

The laws of production describe the technically possible ways of increasing the level of production. Output may increase in various ways. Output can be increased by changing all factors of production.

Diminishing Marginal Returns vs. Returns to Scale: What's the difference?

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3 Comments

  1. Diaprecovun

    This chapter gives a clear account of terms like Production function, short period, long period, fixed factors, variable factors, concepts like total product, average product, marginal product and their interrelationships.

    05.06.2021 at 16:32 Reply
  2. Belda G.

    Terraria the ultimate survival handbook pdf the choice og mandino pdf free download

    10.06.2021 at 12:40 Reply
  3. Sarah G.

    In order to produce goods and services which can be sold, and generate revenue and profits , a firm must purchase or hire scarce inputs, which are its factors of production.

    13.06.2021 at 15:14 Reply

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