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Theroy of Production.pptx

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BharatPoudel12

The document discusses key concepts in production theory including: 1) Production is defined as the process of transforming inputs like labor, capital, land, and technology into useful outputs. 2) Production functions mathematically show the relationship between inputs and output in both the short-run (where labor is variable) and long-run (where all factors are variable). 3) Total, average, and marginal products are discussed as ways to measure output in relation to changing levels of a variable input like labor. Total product is the total output, average product is output per unit of input, and marginal product is the change in output from an additional unit of input.

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Theory of Production BHARAT POUDEL Author and co author of several text books, from +2 level to Masters level
Production Production is the process of transforming inputs into output. The term production means a process by which tangible and intangible inputs or factors of production (land, labour, capital, etc) are converted or transformed to useful tangible and intangible output.
Production Function The technical relationship between inputs and output is called production function. Mathematically a production function can be stated as, Q = f(K, L, N, T, t , B ) (i) Where Q = Output, K = Capital L = Labor, N = Land T = Technology, B= Building t = time
Short-run Production Function Short-run production function refers to the relationship between output and the variables factors of production only like labor, raw materials etc., which can be instantly changed. In short-run, labour is supposed to be variable factor. The firm can change its output by changing units of variable factor keeping other factor constant. It can be written as Qx = f(K ,L)
Long-run Production Function The input-output relationship when the quantity of all factor input is varied, is known as long-run production function. The long-run production function can be written as; Q = f (L, K, N, T )......(ii)
Total Product It refers to the total amount of a commodity produced by the combination of all inputs in a given period of time. Total product is cumulative values of marginal products. It is defined as follows. TP = AP N Where N = Total number of inputs employed
TP Curve 0 10 20 30 40 50 60 70 1 1 2 3 4 5 6 7 8 TP X Y Unit of labor
Average Product An average product is the outcome of the total product divided by the total units of the input employed. It is also known as output per unit factor input. AP = TP/N
AP Curve 0 2 4 6 8 10 12 14 1 1 2 3 4 5 6 7 8 AP X Y Unit of Labor A
Marginal Product Marginal product may be defined as the change in total product resulting from one additional unit of the variable factor. MP = TP/N
MP Curve -2 0 2 4 6 8 10 12 14 16 1 2 3 4 5 6 7 8 Y X MP Unit of labor
Conti. Thanks to all

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Theroy of Production.pptx

  • 1. Theory of Production BHARAT POUDEL Author and co author of several text books, from +2 level to Masters level
  • 2. Production Production is the process of transforming inputs into output. The term production means a process by which tangible and intangible inputs or factors of production (land, labour, capital, etc) are converted or transformed to useful tangible and intangible output.
  • 3. Production Function The technical relationship between inputs and output is called production function. Mathematically a production function can be stated as, Q = f(K, L, N, T, t , B ) (i) Where Q = Output, K = Capital L = Labor, N = Land T = Technology, B= Building t = time
  • 4. Short-run Production Function Short-run production function refers to the relationship between output and the variables factors of production only like labor, raw materials etc., which can be instantly changed. In short-run, labour is supposed to be variable factor. The firm can change its output by changing units of variable factor keeping other factor constant. It can be written as Qx = f(K ,L)
  • 5. Long-run Production Function The input-output relationship when the quantity of all factor input is varied, is known as long-run production function. The long-run production function can be written as; Q = f (L, K, N, T )......(ii)
  • 6. Total Product It refers to the total amount of a commodity produced by the combination of all inputs in a given period of time. Total product is cumulative values of marginal products. It is defined as follows. TP = AP N Where N = Total number of inputs employed
  • 7. TP Curve 0 10 20 30 40 50 60 70 1 1 2 3 4 5 6 7 8 TP X Y Unit of labor
  • 8. Average Product An average product is the outcome of the total product divided by the total units of the input employed. It is also known as output per unit factor input. AP = TP/N
  • 9. AP Curve 0 2 4 6 8 10 12 14 1 1 2 3 4 5 6 7 8 AP X Y Unit of Labor A
  • 10. Marginal Product Marginal product may be defined as the change in total product resulting from one additional unit of the variable factor. MP = TP/N
  • 11. MP Curve -2 0 2 4 6 8 10 12 14 16 1 2 3 4 5 6 7 8 Y X MP Unit of labor