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    Managerial Economics: Production Function

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    Anshu Mishra
    The document discusses production functions and factors of production. It defines a production function as the technical relationship between inputs like labor, capital, land and organization and the maximum output possible. It shows output is a function of several inputs given a technology and time period. The document also covers laws of returns, total, average and marginal products, and returns to scale. It introduces the Cobb-Douglas production function and concepts like isoquants, marginal rate of technical substitution, and MRTS schedules.

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    Managerial Economics: Production Function

    Uploaded by

    Anshu Mishra
    137 views17 pages
    The document discusses production functions and factors of production. It defines a production function as the technical relationship between inputs like labor, capital, land and organization and the maximum output possible. It shows output is a function of several inputs given a technology and time period. The document also covers laws of returns, total, average and marginal products, and returns to scale. It introduces the Cobb-Douglas production function and concepts like isoquants, marginal rate of technical substitution, and MRTS schedules.

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    The document discusses production functions and factors of production. It defines a production function as the technical relationship between inputs like labor, capital, land and organization and the maximum output possible. It shows output is a function of several inputs given a technology and time period. The document also covers laws of returns, total, average and marginal products, and returns to scale. It introduces the Cobb-Douglas production function and concepts like isoquants, marginal rate of technical substitution, and MRTS schedules.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    137 views17 pages

    Managerial Economics: Production Function

    Uploaded by

    Anshu Mishra
    The document discusses production functions and factors of production. It defines a production function as the technical relationship between inputs like labor, capital, land and organization and the maximum output possible. It shows output is a function of several inputs given a technology and time period. The document also covers laws of returns, total, average and marginal products, and returns to scale. It introduces the Cobb-Douglas production function and concepts like isoquants, marginal rate of technical substitution, and MRTS schedules.

    Copyright:

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    Download as pptx, pdf, or txt
    of 17

    MANAGERIAL

    ECONOMICS
    Production Function
    Production

     Production refers to creation of something


    tangible which can be used to satisfy human
    want.
    Agents of production
     Land

     Labor

     Capital

     Organization
    Production Function
     The production function is the technical
    relationship telling the maximum amount of
    output capable of being produced by each &
    every set of specified inputs. It is given set of
    technical knowledge.
     Production function thus expresses the
    technological functional relationship between
    input & output . It shows that output is the
    function of several inputs. Besides the
    production function must be considered with
    reference to a particular period of time & given
    for a state of technology
    Laws of Returns

     The law of increasing returns

     The law of constant returns

     The law of diminishing returns


    Total, Average & Marginal product
    Fixed Variable Total Average Marginal
    input land input productio product product
    (acres) units of n of wheat
    labour in kg
    1 1 40 40.00 40 Increasing
    1 2 95 47.50 55 returns
    1 3 160 53.30 65
    1 4 230 57.50 70 Constant
    returns
    1 5 300 60.00 70
    1 6 360 60.00 60 Diminishing
    1 7 400 57.10 40 returns
    1 8 410 51.25 10 Zero returns
    negative
    returns
    Marginal & Average product curves

    AC

    MC
    Returns to Scale
     Increasing returns to scale

     Constant returns to scale

     Decreasing returns to scale


    The Cobb-Douglas production function

     It is a linear Homogeneous production function


    implying constant returns to scale
    Criticism
     Labour & capital

     Constant returns to scale

     Capital input

     Prevalence of perfect competition

     Homogeneous
    ISO-Quant or Equal product curve
    An Iso-quant schedule

    Factor Units of Unit o factor Quantity of


    combination factor X Y output
    A 1 9 20
    B 2 6 20
    C 3 4 20
    D 4 3 20
    Production isoquants for diff. output
    rates
    Marginal rate of technical substitution
     The rate at which factor input is substituted by
    the other is called the rate of technical
    substitution
    MRTS schedule
    Factor Units of factor x Units of factor y MRTS= Change
    combination in y / change in s
    A 1 9 -
    B 2 6 3:1
    C 3 4 2:1
    D 4 3 1:1

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