Production I-2.pptx - Production I IN THIS LECTURE Concepts of Production Factors of Production Production Function with One Variable Input – Law of

Production I-2.pptx - Production I IN THIS LECTURE Concepts...

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Production I
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IN THIS LECTURE Concepts of Production Factors of Production Production Function with One Variable Input – Law of Variable Proportion Concepts of Total, Average and Marginal Products
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Production Production is the transformation of inputs into output. Production creates utility.
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Production Function Production function is the technical relationship between physical inputs and physical output. Q = f (L,K) where, Q = output L = labor K = capital
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Types of Production Function Short-run Production Function : It refers to the production in the short run where there are some fixed factors. Long-run Production Function : It refers to the production in the long run where all the factors are in variable supply.
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Concept of Product: TP Total Product (TP) or Total Physical Product (TPP) is the total quantity of goods and services produced by a firm with the given inputs during a specific time period. In the short run TP can be increased by employing more units of variable factor. In the long run TP can be increased by employing more of all factors .
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Concept of Product: TP Total Product (TP) or Total Physical Product (TPP) Schedule Units of Labor (L) Total Product (TP) 0 0 1 4 2 10 3 18 4 24 5 28 6 30 7 30 8 28
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Concept of Product: TP Total Product (TP) or Total Physical Product (TPP) Curve TP O Units of Labor TP TP curve starts from the origin, increases at an increasing rate , then increases at a decreasing rate reaches a maximum and after that it starts falling.
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Concept of Product: AP Average Product (AP) or Average Physical Product (APP) is the amount of output produced per unit of a variable factor during a specific time period. Symbolically, AP = Total Physical Product = TPP Labor Input L
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Concept of Product: AP Average Product (AP) or Average Physical Product (APP) Schedule Units of Labor (L) Total Product (TP) Average Product (AP) 0 0 0 1 4 4 2 10 5 3 18 6 4 24 6 5 28 5.6 6 30 5 7 30 4.3 8 28 3.5
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Concept of Product: AP Average Product (AP) or Average Physical Product (APP) Curve AP O
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  • Spring '17
  • Economics

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