Production function and Returns to a factor

What is Production Function? This ppt explains clearly the definition and equation of production function. It explains the three stages of the Law of Variable Proportions that includes the Increasing returns to a factor, Diminishing returns to a factor and Negative returns to a factor. The ppt uses the schedules & curves to clearly identify the 3 stages and their causes. Very useful to students of Economics.

1. by sanjay jogai PRODUCTION FUNCTION 11/17/2020 Slide Copyright : econofun 1

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27. CAUSES OF - INCREASING RETURNS TO A FACTOR FULLER UTILISATION OF THE FIXED FACTOR – Fixed factors are underutilized so calls for greater application of variable factor. DIVISION OF LABOUR & INCREASE IN EFFICIENCY – adding VF ( labour ) enables process based division of labour and thus increases the efficiency/productivity. BETTER COORDINATION BETWEEN THE FACTORS – additional VF improves the degree of coordination between the fixed factor and variable factors. DIMINISHING RETURNS TO A FACTOR FIXITY OF THE FACTOR – more and more of VF forces over utilization of fixed factor and hence greater wear & tear and loss of efficiency. IMPERFECT FACTOR SUBSTITUTABILITY- more and more of variable factor cannot be always used in place of capital, hence output starts diminishing. POOR COORDINATION BETWEEN THE FACTORS – increasing use of VF disturbs the ideal factor ration. This results in poor coordination between the fixed and the variable factors. 11/17/2020 Slide Copyright : econofun 27

28. Try yourself : Draw the TP, MP & AP curve - 11/17/2020 Slide Copyright : econofun 28

29. THANK YOU 11/17/2020 Slide Copyright : econofun 29