Theory of Production

Concept of production function (short and long), Concept of total, average and marginal products, Derivation of total, average and marginal products. Concept of law of variable proportion and return to scale.

Notes

Concept of Production Function

The theory of production explains the relationship between input and output. This relationship is also called the functional relationship between input and output of the firm.

Laws of Return to Scale

Laws of return to scale is a long-run concept. It is also called long run production function.

Law of Variable Proportion

The law of variable proportional explains how the output changes when one factor of production is made variable keeping other factors constant. In this law, the unit of labour change by keeping capital constant .