Postgraduate Diploma in Business Management 2014/15 THEORY OF PRODUCTION AND COST Dr. M. Ganeshamoorthy, B.A (Hons) PDN, PgDED CMB, M.A CMB, Ph.D The Netherlands.

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Postgraduate Diploma in Business Management 2014/15 THEORY OF PRODUCTION AND COST Dr. M. Ganeshamoorthy, B.A (Hons) PDN, PgDED CMB, M.A CMB, Ph.D The Netherlands

THEORY OF PRODUCTION AND COST Production is an activity which transforms inputs into output. Production may also include changing space (transportation) or changing time (storage). Production can be divided into two distinctive periods: 1.Short run production and 2.Long run production Short run is the period of production where at least one input of production remains fixed

THEORY OF PRODUCTION AND COST Long run is the period where all inputs of production are variable. Typically, in the short run labor is considered as the variable input and capital as the fixed factor The different concepts of production in the short runs as follows:

Theory of Production and Cost

Example 1

Theory of Production and Cost