3.2.pptx-FACTORS OF PRODUCTION AND PRODUCTION FUNCTION

FACTORS OF PRODUCTION AND PRODUCTION FUNCTION

1. Business Economics 107 Unit- 3 Faculty Name: Dr. Shuchi Singhal Designation: Associate Professor School/Dept: Management Email address of Faculty Member: [email protected]

2. Programme Outcomes 2 PO1: Apply knowledge of various functional areas of business PO2: Develop communication and professional presentation skills PO3: Demonstrate critical thinking and Analytical skills for business decision making PO4: Illustrate leadership abilities to make effective and productive teams PO5: Explore the implications and understanding of the process of starting a new venture PO6: Imbibe responsible citizenship towards a sustainable society and ecological environment PO7: Appreciate inclusivity towards diverse cultures and imbibe universal values PO8: Foster Creative thinking to find innovative solutions for various business situations

3. Course Objective and Course Outcomes 3 CO1:Understand the fundamental concepts of Business Economics. CO2:Analyze the relationship between consumer behaviour and demand. CO3:Explore the theory of production through the use of ISO-QUANTS. CO4:Understand the concept and relevance of short-term and long-term cost. CO5:Examine pricing decisions under various market conditions. CO6:Analyse economic challenges posed to businesses

4. Syllabus

5. Unit-III : (Theory of Production) 5 3 .1 MEANING AND CONCEPT OF PRODUCTION 3 .2 FACTORS OF PRODUCTION AND PRODUCTION FUNCTION 3 .3 FIXED AND VARIABLE FACTORS 3.4 LAW OF VARIABLE PROPORTION (SHORT RUN PRODUCTION ANALYSIS )-Part 1 3.5 LAW OF VARIABLE PROPORTION (SHORT RUN PRODUCTION ANALYSIS)-Part 2 3.6 LAW OF VARIABLE PROPORTION (SHORT RUN PRODUCTION ANALYSIS)- Part 3 3.7 LAW OF VARIABLE PROPORTION (SHORT RUN PRODUCTION ANALYSIS)-Part 4 3.8 LAW OF RETURNS TO A SCALE(LONG RUN PRODUCTION ANALYSIS) THROUGH THE USE OF ISOQUANTS- Part 2 3.9 LAW OF RETURNS TO A SCALE(LONG RUN PRODUCTION ANALYSIS) THROUGH THE USE OF ISOQUANTS-Part 3 3.10 LAW OF RETURNS TO A SCALE(LONG RUN PRODUCTION ANALYSIS) THROUGH THE USE OF ISOQUANTS- Part 4 3.11 LAW OF RETURNS TO A SCALE(LONG RUN PRODUCTION ANALYSIS) THROUGH THE USE OF ISOQUANTS- Part 5

6. 3.2 Factors of Production. Production Function 6

7. 3. 2 FACTORS OF PRODUCTION AND PRODUCTION FUNCTION By: Shuchi Goel 7

8. Suggested Readings 1. Author : Christopher R. Thomas & S. Charles Maurice Title of the Book : Managerial Economics-Foundations of Business Analysis and Strategy Chapter’s Name: Production and Cost in the Short Run 2. Author : Paul A. Samuelson and William D Nordhaus Title of the Book : Economics Chapter’s Name : The Central Concepts of Economics https://www.intelligenteconomist.com/factors-of-production / By: Shuchi Goel 8

9. 3.2 FACTORS OF PRODUCTION AND PRODUCTION FUNCTION 3.2.1 Factors of Production Each distinct input into the production process can be regarded as a factor of production. All the factors of production help in the process of production. For example, for the production of garments, piece of land is required to build a factory, where the production takes place. This also requires the services of labour. Capital is objects like machinery, equipment, etc that are used in production. Finally, the services of entrepreneur are required to organize, supervise and coordinate the whole process of production. By: Shuchi Goel 9

10. The traditional four-fold classification of factors of production, viz., land, labour, capital and entrepreneur is modified by some economists. To some, capital includes land and labour includes entrepreneur. At the extreme, Karl Marx emphasised only one factor of production, i.e., labour. In his view, land cannot produce anything by itself, unless it is used by man. Further, capital is man-made and is the embodiment of labour . Finally, entrepreneur is not a separate factor of production, rather it is a form of labour. Therefore, all factors of production are reducible to labour. By: Shuchi Goel 10

11. Land- or more generally, natural resources- represent the gift of nature to our societies. It consists of the land used for farming or for underpinning houses, factories and roads; the energy resources that fuel our cars and heat our homes; and the non energy resources like copper and iron ore, etc. Labour - consists of the human time spent in production- working in automobile factories, writing software, teaching school, or baking pizzas. Thousands of occupations and tasks, at all skill levels, are performed by labour. By: Shuchi Goel 11

12. Capital- Capital goods include machines, buildings, tools, etc used to produce goods and services. Some common examples of capital include hammers, forklifts, conveyer belts, computers, and delivery vans The accumulation of specialized capital goods is essential to the task of economic development. Entrepreneurship- Entrepreneurship is the risk-taking resource. Entrepreneurs are the people who combine land, labour and capital resources to start a business. Not every business is successful; sometimes they fail. Payment for risk taking or entrepreneurship is called profit. By: Shuchi Goel 12

13. 3.2.2 Production Function The relationship between the amount of input required and the amount of output that can be obtained is called the production function . The production function specifies the maximum output that can be produced with a given quantity of inputs, given the existing technology or state of knowledge concerning available production methods. By: Shuchi Goel 13

14. A rational producer always uses technically most efficient method of production. Suppose, the two methods of production P 1 and P 2 require 2 and 2 units of labour, while 3 and 4 units of capital respectively . Here, the rational producer will choose method P 1 to produce the commodity, since it saves one unit of capital without using more amount of labour. Hence, this method is economical and more efficient. Mathematically, production function can be expressed as: Q = f (I, L, K, E) Where I = Land, L= labour, K= Capital and E= Entrepreneur By: Shuchi Goel 14

15. Conclusion Each distinct input into the production process can be regarded as a factor of production. Mathematically, production function can be expressed as: Q = f (l, L, K, E) Where I = Land, L= labour, K= Capital and E= Entrepreneur By: Shuchi Goel 15