Category: 6. Cost & Production Analysis

What is Returns to Scale? Returns to scale imply the behavior of output when all the factor inputs are changed in the same proportion given the same technology. In other words, the law of returns to scale explains the proportional change in output with respect to proportional change in inputs. Table of Content [Show] Assumption of Returns…

What is Producer Equilibrium? Producer equilibrium implies a situation in which a producer maximizes his/her profits. Thus, he /she chooses the quantity of inputs and output with the main aim of achieving the maximum profits. Table of Content [Show] In other words, he/she needs to decide the appropriate combination among different combinations of factors of production…

What is Isoquant Curve? Isoquant Curve: A technical relation that shows how inputs are converted into output is depicted by an isoquant curve. It shows the optimum combinations of factor inputs with the help of prices of factor inputs and their quantities that are used to produce the same output. The term ISO implies equal and quant means quantity or…

Law of Diminishing Returns Definition As equal increments of one input are added; the inputs of other productive services being held, constant, beyond a certain point the resulting increments of the product will decrease, i.e., the marginal product will diminish.G. Stigler As the proportion of one factor in a combination of factors is increased, after…

The short run refers to a time period in which the supply of the inputs, such as plant and machinery is fixed. Only the variable inputs, such as labour and raw materials can be used to increase the production of the goods. Table of Content [Show] In other words, in the short run, change in production is brought…

 Types of Production Functions are: Table of Content [Show] There are different types of production functions that can be classified according to the degree of substitution of one input by the other. Figure illustrates different types of production functions: Cobb Douglas Production Function The Cobb Douglas production function, given by American economists, Charles W. Cobb and Paul. H Douglas, studies the…

What is Production Function? Production function can be defined as a technological relationship between the physical inputs (i.e., factors of production) and the physical output of the organisation. Table of Content [Show] Also Read: Production in Economics Meaning of Production Function The production function is a statement of the relationship between a firm’s scarce resources (i.e. its inputs) and the…

What is Production Possibility Curve? In economics, the Production Possibility Curve provides an overview of the maximum output of a good that can be produced in an economy by using available resources with respect to quantities of other goods produced. It is also known as Production Possibility Frontier (PPF) or transformation curve. Table of Content [Show] Also Read: Production in Economics…

Production in Economics Production in Economics is sometimes defined as the creation of utility or the creation of wants – satisfying goods’ and services. It is said that just as a man cannot destroy matter, he also cannot create matter. “If consuming means extracting utilities from,” says Fraser, “producing means putting utility into.” Production, therefore, should be defined,…