The Theory of Production. By: Dalia Campos & AJ Coleman. What is the theory of production?. Theory Of Production ;. Theory dealing with the relationship between the factors of production & the output of goods & services.
The Theory of Production
By: Dalia Campos
& AJ Coleman
What is the theory of production?
Theory Of Production;
Theory dealing with the relationship between the factors of production & the output of goods & services.
The theory of production is generally based on short-run and long-run.
For example getting a job over the holiday season is short-run while getting a career is a long-run.
Production period so short that only variable inputs can be changed
Production period long enough to change amount of variable & fixed inputs used in product.
Law Of Variable Proportion
Rule stating that short-run outputs will change as one input is varied while others are held.
Unprocessed natural resources used in production
Examples of Raw Material;
Timber, Iron Ore, Coal, Gold, Silver, Grain, Animals, Tobacco, Sugar, Spices
Total output produced by a firm.
Total product curve
Extra output due to the addition one more unit of input.
Stage of Production
Three Stages Of Production:
Stage I; In this stage the company will increase productivity.
Stage II; Illustrated the principal of diminishing returns, the stage where output increases at a diminishing rate as more units of a variable inputs are added.
Stage III; In this stage a non-mixed factor is added or increase output ceases to increase and may even begin to decrease.
Phrase of production increasing, decreasing and negative returns
Stage of production where output increases at a decreasing rate as more units of variable input are added.