Date : 27.5.2020
A very good morning boys
Today we begin with the chapter Production Function
Production Function is an expression of the technological relation between phusical inputs and output of a good.
A few important things you should know:
Short Run: Short Run refers to a period in which output can be changed by changing only variable factors.
Long Run: Long Run refers to a period in which output can be changed by changing all factors of production
Variable Factors : Variable Factors refer to those factors, which can be changed in the short run. Ex Raw material, power, etc
Fixed Factors : Fixed Factors refer to those factors, which cannot be changed in the short run. Ex Plant and Machinery, Building, etc
OUR SYLLABUS IS RESTRICTED TO SHORT RUN PRODUCTION FUNCTION also known as ( LAW OF VARIABLE PROPORTION)
CONCEPT OF PRODUCT:
Total Product : refers to total quantity of goods produced by a firm during a given period of time with the given number of inputs.
Average Product : refers to output per unit of variable input.
AP= TP/Units of variable factor
Marginal Product : refers to addition to total product, when one more unit of variable factor is employed.
MP=TPn-TPn-1 OR MP= Change in TP/ Change in units of variable factor
TP is the summation of MP
LAW OF VARIABLE PROPORTION
Law of Variable Proportion states that as we increase quantity of onlt one input keeping all other inputs fixed, TP initially increases at an increasing rate, then at a decreasing rate and finally at a negative rate.
Law of Variable Proportion is also known as "Law of Returns" or "Law of Returns to a Factor"
Assumptions of Law of Variable Proportions
1. Operates in short run, as factors are classified as variable and fixed factor
2. This Law applies to the field of production only
3. The state of technology is assumed to be constantduring the operation of this law.
4.It is assumed that all variable factors are equally efficient.
Let us now understand the law
Suppose a farmer has 1 acre of land (fixed factor) on which he wants to increase the production of wheat with the help of labour(variable factor).When he employed more and more units of labour, initially output increased at an increasing rate,then at a decreasing rate and finally at a negative rate.
This behaviour is shown through a table
As seen in the above table and diagram
We see that there are three phases to the law of variable proportion.
Increasing Returns to a Factor, Decreasing Returns to a Factor and the Diminishing Returns to a Factor.
A rational producer will always seek to operate in the 2nd phase of the Law of Variable Proportion.
In 1st phase there is scope for more profit if production is increased with more units of variable factors.
In 3rd phase , MP of each variable factor is negative.No rational producer would like to produce where he is getting negative returns.
So every rational producer will produce in the 2nd phase as in this phase Total Productivity is maximum and Marginal Productivity of each variable factor is positive.
Reson for Increasing Returns(1st Phase)
1. Better utilisation of Fixed Factors
2. Increased Efficiency of Variable factors
3. Indivisibility of Fixed Factors
Reason for Diminishing Returns to a Factor(2nd Phase)
1. Optimum combination of factors.
2. Imperfect Substitutes
Reason for Negative Returns to a Factor(3rd Phase)
1. Limitation of Fixed Factor
2. Poor coordination between variable and fixed factors
3. Decrease in Efficiency of Variable Factor
Relation between TP and MP
1. As long as TP increases at increasing rate ,MP also Increases
2. When, TP increases at diminishing rate, MP decreases
3. When TP reaches maximum point MP becomes zero.
4.When TP starts decreasing, MP becomes negative
Relationship between AP and MP
1. As long as MP is more than AP, AP rises
2. When MP is equal to AP, AP is at its maximum
3. When MP is less than AP, AP falls, but becomes negative.
Please go through the 2 video links given below to understand the chapter very well
https://www.youtube.com/watch?v=eWJUFHkiulI
https://www.youtube.com/watch?v=UZaaTFmxwVg
A very good morning boys
Today we begin with the chapter Production Function
Production Function is an expression of the technological relation between phusical inputs and output of a good.
A few important things you should know:
Short Run: Short Run refers to a period in which output can be changed by changing only variable factors.
Long Run: Long Run refers to a period in which output can be changed by changing all factors of production
Variable Factors : Variable Factors refer to those factors, which can be changed in the short run. Ex Raw material, power, etc
Fixed Factors : Fixed Factors refer to those factors, which cannot be changed in the short run. Ex Plant and Machinery, Building, etc
OUR SYLLABUS IS RESTRICTED TO SHORT RUN PRODUCTION FUNCTION also known as ( LAW OF VARIABLE PROPORTION)
CONCEPT OF PRODUCT:
Total Product : refers to total quantity of goods produced by a firm during a given period of time with the given number of inputs.
Average Product : refers to output per unit of variable input.
AP= TP/Units of variable factor
Marginal Product : refers to addition to total product, when one more unit of variable factor is employed.
MP=TPn-TPn-1 OR MP= Change in TP/ Change in units of variable factor
TP is the summation of MP
LAW OF VARIABLE PROPORTION
Law of Variable Proportion states that as we increase quantity of onlt one input keeping all other inputs fixed, TP initially increases at an increasing rate, then at a decreasing rate and finally at a negative rate.
Law of Variable Proportion is also known as "Law of Returns" or "Law of Returns to a Factor"
Assumptions of Law of Variable Proportions
1. Operates in short run, as factors are classified as variable and fixed factor
2. This Law applies to the field of production only
3. The state of technology is assumed to be constantduring the operation of this law.
4.It is assumed that all variable factors are equally efficient.
Let us now understand the law
Suppose a farmer has 1 acre of land (fixed factor) on which he wants to increase the production of wheat with the help of labour(variable factor).When he employed more and more units of labour, initially output increased at an increasing rate,then at a decreasing rate and finally at a negative rate.
This behaviour is shown through a table
|
Fixed Factor(Land in acres)
|
Variable Factor(Labour)
|
TP(Units)
|
MP(Units)
|
Phase
|
|
1
|
1
|
10
|
10
|
1st (increasing returns to a
factor)
|
|
1
|
2
|
30
|
20
|
|
|
1
|
3
|
45
|
15
|
2nd (Diminishing Returns to a
factor)
|
|
1
|
4
|
52
|
7
|
|
|
1
|
5
|
52
|
||
|
1
|
6
|
48
|
-4
|
3rd( Diminishing returns to a factor)
|
As seen in the above table and diagram
We see that there are three phases to the law of variable proportion.
Increasing Returns to a Factor, Decreasing Returns to a Factor and the Diminishing Returns to a Factor.
A rational producer will always seek to operate in the 2nd phase of the Law of Variable Proportion.
In 1st phase there is scope for more profit if production is increased with more units of variable factors.
In 3rd phase , MP of each variable factor is negative.No rational producer would like to produce where he is getting negative returns.
So every rational producer will produce in the 2nd phase as in this phase Total Productivity is maximum and Marginal Productivity of each variable factor is positive.
Reson for Increasing Returns(1st Phase)
1. Better utilisation of Fixed Factors
2. Increased Efficiency of Variable factors
3. Indivisibility of Fixed Factors
Reason for Diminishing Returns to a Factor(2nd Phase)
1. Optimum combination of factors.
2. Imperfect Substitutes
Reason for Negative Returns to a Factor(3rd Phase)
1. Limitation of Fixed Factor
2. Poor coordination between variable and fixed factors
3. Decrease in Efficiency of Variable Factor
Relation between TP and MP
1. As long as TP increases at increasing rate ,MP also Increases
2. When, TP increases at diminishing rate, MP decreases
3. When TP reaches maximum point MP becomes zero.
4.When TP starts decreasing, MP becomes negative
Relationship between AP and MP
1. As long as MP is more than AP, AP rises
2. When MP is equal to AP, AP is at its maximum
3. When MP is less than AP, AP falls, but becomes negative.
Please go through the 2 video links given below to understand the chapter very well
https://www.youtube.com/watch?v=eWJUFHkiulI
https://www.youtube.com/watch?v=UZaaTFmxwVg
GOD MORNING SIR, KEVIN SUNIL PAPPAN 11B
ReplyDeleteGood Morning sir, Uriah
ReplyDeleteGood morning sir, joel david
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