production functions

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A presentation on:

A presentation on Production function

Meaning of production:

Meaning of production Its an activity that transforms inputs in to out puts.

Production Function:

Production Function

Production Function:

Production Function Inputs Process Output Land Labour Capital Product or service generated – value added

The production function :

The production function The production function can be mathematically written as Q=F(Lb,L,K,T,t….) Lb=land. L=labor. K=capital. T=Technology. t=time.

Classification of production function:

Classification of production function Short term production function. (K & Lb are constant) Long run production function. (Lb is constant)

Factors affecting productivity:

Factors affecting productivity Technology Inputs Labor Capital Machinery Land Raw material power Time period

PowerPoint Presentation:

States the relationship between inputs and outputs Inputs – the factors of production classified as: Land – all natural resources of the earth – not just ‘terra firma’! Price paid to acquire land = Rent Labour – all physical and mental human effort involved in production Price paid to labour = Wages Capital – buildings, machinery and equipment not used for its own sake but for the contribution it makes to production Price paid for capital = Interest

Analysis of the short run:

Analysis of the short run In the short run at least one factor fixed in supply but all other factors capable of being changed Reflects ways in which firms respond to changes in output (demand) Can increase or decrease output using more or less of some factors but some likely to be easier to change than others Increase in total capacity only possible in the long run Law of variable proportion

Analysis of the long run function:

Analysis of the long run function The long run is defined as the period of time taken to vary all factors of production By doing this, the firm is able to increase its total capacity – not just short term capacity Associated with a change in the scale of production The period of time varies according to the firm and the industry

Alternatives of the long run production:

Alternatives of the long run production Constant returns to the scale out put increases in the same proportion as the increase in the input. Increasing return to scale out put increases by a greater proportion than the increase in inputs. Decreasing returns to the scale. output increases in the lesser proportion than the increase in the inputs.

Cobb-Doughlas production function:

Cobb- Doughlas production function Power function Q= A k L a is positive function Q= A k L b is the positive function a (1 -a) b a

Properties of Doughlas production function:

Properties of Doughlas production function First , log(Q)=a log(A)+ alog (k)+blog(L) Secondly power function are homogenous Thirdly = E = d Q /Q = d Q . k d k /k d k Q

PowerPoint Presentation:

Fourthly relative share relative share of k in q can be obtained Similarly for ‘b’ L in Q can be obtained Finally cod doughlas production function in general form Q= k L Zero cost=zero production a (1 -a)

PowerPoint Presentation:

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