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Theory of Production
By Bharat Galani MeraSkill.com Š MeraSkill
Theory of Production
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Index What is Production? Factors of Production Production Function Law of Variable Proportions Returns to Scale Product optimisation Economies & Diseconomies of scale Š MeraSkill
Production
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What is Production? Common parlance: making something material Economics: - converts the resources of nature to satisfy human wants. - activity directed towards the satisfaction of the wants of people by converting - physical inputs into physical outputs. Ex- making of cloth, service of doctors, lawyers, teachers, actors, dancers, Production not creation of matter
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Production Creation of form utility -raw material to fg place utility - extraction from earth, transferring goods time utility- making them available at time when required personal utility- personal skills production is creation of utility Š MeraSkill
Factors of Production
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Factors of Production Factors or Resources which makes production possible Land Labour Capital Entrepreneur Š MeraSkill
Land Not limited to soil or earth surface but includes - all free gift of nature. water,air,natural vegetation etc. Characteristic Nature’s gift Supply is fixed Indestructible power Passive Factor Different uses
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Labour In economics, it is mental or physical exertion for reward and not for pleasure/love Eg - work of maid vs work of housewife Characteristic Human effort Perishable Inseparable from Labourer Power differs from labourer to labourer All labour are not productive Poor bargaining power Choice hrs of labour vs hrs of leisure Mobile
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Capital Part of wealth used for further production of wealth capital vs wealth capital stock concept vs income flow concept produced means of production man made instrument of production Helps in further production
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