1. MANAGERIAL ECONOMICS & FINANCIAL ANALYSIS
CHAPTER-2
Mr. K. NAGAIAH, (Ph.D)./
Ms. RUHI AFREEN/
Ms. S. RUBEENA
ASSISTANT PROFESSOR
DEPARTMENT OF MANAGEMENT STUDIES

2. THEORY OF PRODUCTION AND COST ANALYSIS
UNIT-II
THEORY OF PRODUCTION AND COST ANALYSIS

3. PRODUCTION
Production is the conversion process of Input resources into Output.

4. PRODUCTION FUNCTION
A producer has to combine different factors or inputs to produce the certain outputs
Production function explains the physical relation between input used and output produced by the firm. This relationship when expressed in the form of an equation is as follows
O=f (a, b, c, d)

5. ISOQUANTS

6. MARGINAL RATE OF TECHINAL SUBSTITUTION (MRTS)

7. Laws of Return to Scale Laws of increasing return to scale.
Laws of decreasing return to scale.
Laws of constant return to scale.

9. ECONOMIES OF SCALE
Internal advantages
External advantages

10. Internal advantages Managerial economies Commercial economies
Financial economies
Technical economies
Marketing economies
risk bearing economies
research &development economies

11. External advantages Infrastructural Specialization
Information and market
Research &development.

12. BREAK Even Analysis