Ankita Trivedi Shruti Mody Pratik Agarwal Pooja Singh Jinesh Jain Nitu Yadav Tejal Joshi

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Introduction to Production function

Definition :The Production Function is the name given to the relationship between the rates of input of productive services and the rate of output of product. The relationship between the amount of input required to produce a certain amount of output is called Production Function. Q=f{K,L,I,O}

Features Of Production Function

Flow Concept Physical Concept Depends on the state of technology and the inputs used Indicates the objective of a rational form Production function is of various types

Types of Production Function

 Fixed and Variable Production function  Linear production function  Cobb-Douglas Production function  Short run and Long run Production function

Production Function and Isoquants

INTRODUCTION:
 An isoquant is a curve which shows the various

combination of the two factors of production giving the same level of output
 An isoquant curve is locus of points representing

various combination two inputs-CAPITAL AND LABOUR yielding the same output

Assumptions To Isoquant Curve

There are only two inputs, viz, lobour (L) and capital (K) ,to produce a commodity (X) ; The two inputs labour(L) and capital (K) can substitute each other but at a diminishing rate ; and The technology of production is given.

Graphical Representation
Combina Units Of tion Capital
A 1

Units Of Labour
14

10

Properties of Isoquants
y An isoquant has a negative slope y Isoquants are convex to the origin y Isoquants do not intersect each other y Isoquants do not intercept either axis y Isoquants can be oval shaped y Higher isoquants indicate higher level of production

INDIFFERENCE CURVE An indifference curve shows the various combination of two goods giving the same level of satisfaction. It is used to explain consumers equilibrium. It deals with the level of satisfaction. Here the level of satisfaction cannot be quantified. The concept of marginal rate of substitution is used in indifference curve analysis. The distance between two indifference curves cannot be quantified. An indifference curve is represented as follows:

ISOQUANTS An isoquant is a curve showing all the combinations of two factors of production giving the same level of output. It is used to explain producers equilibrium. It deals with the level of output. Here the level of output can be quantified. Here the concept of marginal rate of technical substitution is used.

The distance between two isoquants can be measured easily.

An isoquant is drawn below:

Law Of Return To Scale

The relationship between input and output in the long run is explained by the laws of returns to scale.

According to this law as a firm in the long run

increases the quantity of all factors employed,other things being equal,the output may rise at a more rapid rate than the rate of increase in inputs, than outout may increase in the same proportions of output and ultimately output may rise than proportionately.

Assumptions Of Law Of Return To Scale

This law is based on certain assumptions:Technology of production remains unchanged All units of the factors are homogeneous Returs are measured in physical terms

Stages Of Return To Scale

This law also explains the relationship between input and output through three stages they are :Increasing returns to scale Constant returns to scale Diminishing returns to scale

BIBLIOGRAPHY
 H.L.Ahuja  D.N.Dwivedi  Vipul Prakashan