Production variable proportion .PPT..///

A production function is a mathematical relationship that describes how inputs, such as labor, capital, and raw materials, are transformed into outputs or goods and services. It shows the maximum output that can be produced with a given set of inputs, reflecting the efficiency and technology of the production process. The production function is often expressed as
𝑄
=
𝑓
(
𝐿
,
𝐾
)
Q=f(L,K), where
𝑄
Q is output,
𝐿
L is labor, and
𝐾
K is capital. It helps firms and economists understand how changes in input levels affect output and is essential for analysing productivity, costs, and growth in an economy.

1. P R O D UCTI O N

2. PRODUCTION INTRODUCTION: Production is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (output). It is the act of creating an output , a good or service which has value and contributes to the utility of individuals. The area of economics that focuses on production is referred to as production theory, which in many respects is similar t o the c onsumptio n (o r c onsumer ) theo r y i n e c onomic s . Economic well-being is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human wants and needs . The degree to which the needs are satisfied is often accepted as a measure of economic well-being. In production there are two features which explain increasing economic well-being. They are improving quality-price-ratio of goods and services and increasing incomes from growing and more efficient market production or total production which help in increasing GDP. The most important forms of production are: market production public production household production

3. WHAT IS PRODUCTION ? In simple way we can say that production is an activity that transforms input into output INPUT PROCESS OUT P UT

4. Factors affecting productivity ☺ T echnolo g y Inputs C-capital E - ent r ep r eneurship L-land L- labour

5. inputs Output process CA P I T AL ENTERPRENEURSHIP L AND L ABOUR Product Or Service g ene r a t ed

6. PRODUCTION FUNCTION A production function can be an equation ,tabl e o r g r ap h p r esenting th e maximum amount of production that a firm can produce from a given set of inputs during a period of time

7. Production function The production function can be mathematically written as: Q=f(L,K,T……….n) Where. Q = output L = labour K = capital T = level of technology n = other inputs employed in production

8. USE OF PRODUCTION FUNCTION H o w t o obtai n maximu m output H elps th e p r odu c ers t o de t ermine w hethe r empl o yin g v ariable inputs /costs are profitable Highly useful in longrun decisions least cost combination of inputs and to produce an output

9. T ype s o f p r oductio n function T ypes Short –Run ( inpu t k ept c onstan t one inpu t (labour ) i s v arie d ) Long – Run ( varying all inputs ) Law of variable proportion L a w o f r eturns of scale

10. Short run production Function # on e v ariabl e fac t or #Remaining constant

11. long run production Function # Al l inpu t v ariable Q=F(L,C)

12. LAWS OF PRODUCTION Law of diminishing returns or law of variable proportion Laws of return to scale

13. Law of variable proportion I t sta t e s that: if one factor is used more & more , keeping the other factors constant. The total output will increase at an increasing rate in the beginning and then at diminishing rate and eventually decreases absolutely.

14. Th e moder n e c onomis t h av e c ombin e th r e e sta g e s o f r eturn s t o fac t or and make a theory of law of variable proportions . The law of variable proportion is short period theory which explain that when variable factors then total production change with different proportion. M eaning

15. or The law because it is applicable in every field of life . It means in every filed of life the initial stage (increasing return ) occurs then it chan g es in t o diminishin g r eturns an d af t er a du r atio n i n negat i v e returns .The main fields where it is applicable are discuss below:

16. Defination According to leftwich ,”The law of variable proportion states that if the input of one resource is increased by equal increments per unit of line while the inputs of other resources are constant total output will increase , but beyond some point the r esulting outpu t inc r eases wil l be c om e smalle r an d smalle r ” .

17. ASSUMPTIONS: Constant Technology Short run Homogeneous Factors Variable input Ratio

18. Explanation With reference to the laws of the economists have formulated three stages which are discussed below. ✔ First stage or ( Income return) ✔ Se c on d sta g e o r (Diminishin g r eturn) ✔ Third stage or ( Negative return )

19. U ni t o f land U ni t of labour Total p r oduction A v e r a g e profit M a r ginal product Description 2 1 3 3 3-0=3 Increasing 2 2 7 3.5 7-3=4 Return 2 3 12 4.0 12-7=5 TP^ AP^MP^ 2 4 16 4.0 16-12=4 Diminishing 2 5 19 3.8 19-16=3 Returns 2 6 21 3.5 21-19=2 TP^AP_ MP_ 2 7 22 3.14 22-21=1 Negative 2 8 22 2.75 22-22=0 Return 2 9 21 2.33 21-22=1 TP_AP_MP_

20. Three Stages of production : STAGE 1 : INCREASING RETURNS As the production of one factor in the combination of factor is increased up t o a point , the M P o f the fac t o r wil l inc r ease. Reasons: Indivisibility of factors Quantity of fixed factor Division of labour Economies

21. STAGE 2 : DIMINISHING RETURNS As the production of one factor in the combination of factor is increased after a poin t the av e r a g e & M P o f the fac t o r wil l diminishin g . Reasons: Scarcity of fixed factor Indivisibility of fixed factor L ac k o f per f ect substitutio n o f fac t o r o f p r oduction

22. STAGE 3: NEGATIVE RETURNS Reasons: ☺ E x c ess i v e v ariabl e fac t or ☺ Inefficiency of fixed factor

23. Application or Applicable to Agriculture sector In order to increasing agriculture production , labour ( variable factor ) increased with land ( fixed Factor ) increased with land (fixed factor ) as the result of it the marginal returns of variable factor begins to fall .As a bult of it the law of diminishing results becomes applicable. Applicable to extractive industries The law is also applicable to the following extractive industry:-

24. 1. Mining industry I n o r de r t o g et mo r e an d mo r e mine r al s on e ha s t o g o dee p in t o the mine s , which may increase in the cost of production in the firm of wages of labour, expensing on lighting etc. As a result of it law diminishing becomes applicable.

25. 2. Building The law is also applicable to the multi –story buildings . Higher the building ,larger the proportional expenditure on upper storey is very less as compared to the ground floor.

26. 3. Fisheries The stock of fish at any given spot of the river or sea is always limited and to get mo r e fishe s the fisherme n h av e t o g o ou t in t o the dee p sea . A s the r esult o f i t c os t of product increases .so the stage of diminishing occurs.

27. 3.Applicable to industries I n o r de r t o inc r eased the manufacturin g indust r y labou r an d capita l pl a y an important role as compared to land and when labour is increase with fixed factor (land ) then the ma r gina l r eturns o f the v ariabl e fac t o r g oe s o n dec r eeing af t er the optimum level of production.

28. Conclusion: I n the end w e ca n s a y that the l a w o f v ariabl e p r oductio n is applicable in every field of life . Where fixed various factor are used in order to get optimum production level

29. THANK YOU