1. Production Theory

2. Terms to know 1 Theory of Production Definition of Product
Mean of Production
Production Function 2
Factors of Production
Land and its characteristics
Labor and its Characteristics
Capital and its kind
Entrepreneur and his functions

3. Product
Anything that can satisfy the needs of a customer is known as a Product.
Product can be
Physical Good: like computer
Service: like telecommunication service
Places: like land
Properties like real estate

4. Production
Transformation of inputs into output is known as Production.
Production is the process of conversion of inputs into output.
Inputs
Land
Labour
Capital
Raw material
Machines
Methods
Procedures
Output
Goods
Services

5. Efficient Production Process
When small input leads to more output, the production process is known as efficient production process.
Machines
Methods
Procedures
Output
Goods
Services
Inputs
Land
Labour
Capital
Raw material

6. In-Efficient Production Process
When Large input leads to Less output, the production process is known as in-efficient production process.
Machines
Methods
Procedures
Inputs
Land
Labour
Capital
Raw material
Output
Goods
Services

7. Production Function:
The functional relationship between the inputs and output is known as Production Function.
Output = f (factors of Production)
Q= f (Land, Labor, Capital, Raw material etc)
For example Q = 2LK
This production function means that we get twice amount of output of the amount of labor and capital used.

8. Meaning of FOP
Factors of production are the inputs used to produce goods These are
Land
Labor
Capital
Organization/Entrepreneurship.

9. 1. LAND
Meaning
Generally by land we mean soil, but in Economics land refers to all available natural resources which can be used to produce an income. E.g. soil, mountains, seas, minerals etc.

10. Characteristics of land:
Free Gift of nature to a Country.
Supply of Land is fixed in Nature:
Different characteristics in Different Places
Mobility of land is impossible.

11. 2. LABOR
Definition
Labor is any form of mental or physical work, done for the sake of reward, directed towards the production of goods and services.

12. Characteristics of Labor:
Labor and laborer are in separable
Un-identical
Weak bargaining position
Inverse relationship between supply of labor and wage rate
Mobility of labor is limited

13. Efficiency of Labor:
Efficiency of labor means the working capacity of laborer.
We can also define efficiency by
“Achieving the maximum benefit from a given amount of resources”.

14. Factors Determining the Efficiency of Laborer
Personal characteristics
Education and training
Wages and attractive benefits
Working environment

15. Types of wages
Salary
Pay
Wages
Fee

16. Types of wages
Salary)
if a person is highly paid, the numeration are called salary for example the earning of professor, engineer ,General manager named as salary.
Pay
the amount to the middles class workers such as typist, clerks, called pay

17. Wage
the reward which is paid the inferior type workers, whether, they may skilled or not unskilled is called.
Fee
fee are earning of independent workers, such as doctors

18. 3. Capital
Definition
Capital refers to that part of wealth which is used in producing further wealth. E.g. plants and machinery, tools, stock of raw materials etc.
That part of money which produce further money is called capital

19. KINDS OF CAPITAL
1 FIXED CAPITAL Fixed capital consist of the equipment used to increase production e.g. machinery. It is fixed capital that does not change its form in the course of production. 2 CIRCULATING CAPITAL It is the form of capital that can lead to return when fully manufactured. For example Raw Material are changed into finished goods which are then exchanged for money and this is used to buy more circulating capital.

20. MOBILITY OF CAPITAL
Shifting of capital from one place, one industry or one country to another in pursuit of increasing the efficiency of capital is known as mobility of capital.
1 National Mobility of Capital
If the capital is moving within an economy it is known as national mobility of capital
2 International Mobility of Capital
If the capital is moving from one economy to another economy it is known as inter national mobility of capital

21. 4. ENTREPRENEURSHIP
An entrepreneur is the one who combines the factors of production to produce goods and services. OR
An entrepreneur is one who takes the risk of producing a product for a profit.
And entrepreneurship is the managerial ability and risk taking that contribute so much to a productive economy.

22. FUNCTIONS OF NTREPRENEUR
Planning of business
Combines factors of production
Responsibility for sale of production
Faces uncertainties of future
Efficient administration
Distribution of rewards to four FOP

23. THANK YOU