2. THEORY OF PRODUCTION EXPLAIN A INPUT- OUTPUT RELATIONSHIP, A FIRM SO AS TO MINIMIZE COST OF PRODUCTION. Labour + capital = Output

3.  Similar to IC curve, Equal-product curve or isoquants represents all those input combinations which are capable of producing the same level of output.

4. Various factors combinationIsoquants Factor Com. Factor XFactor Y A112 B28 C35 D43 E52

6.  APP = TPP / amount of input

7.  the additional output that results from the use of an additional unit of a variable input, holding other inputs constant  measured as the ratio of the change in output (TPP) to the change in the quantity of labor (or other input) used

8.  Note that the MPP is positive when an increase in labor results in an increase in output; a negative MPP occurs when output falls when additional labor is used.

10.  MPP rises when TPP increases at an increasing rate, and declines when TPP increases at a decreasing rate.  MPP is negative if TPP declines when labor use rises

11.  APP rises when MPP > APP  APP falls when MPP < APP  APP is maximized when MPP = APP

13.  The functional relationship between physical inputs and physical outputs of a firm is known as production function. Algebraically production function can be written as q= f(a,b,c,d……..)  Where q stands for quantity of output and a,b,c,d stand for quantity of factors of production. f denotes for unspecific relationship between inputs and outputs.

14.  In economics we are interested in two types of production functions:-  (i) Law of variable factor proportion (law of diminishing returns)  (ii) Return to scale

15.  Linear homogenous production function It implies that if inputs increase in same proportion outputs increase in same proportion, it is known as HPF of first degree.  Cobb-Douglas production function.