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There Are Three Types of Production Function

There are three types of production functions: 1) One with a single variable input 2) One with two variable inputs 3) One with all variable inputs. The production function with one variable input follows the law of diminishing marginal returns, where marginal and average product initially increase with additional units of the variable input, then diminish after a point. It demonstrates three stages of production - increasing returns, diminishing returns, and negative returns. Isoquants represent production functions with two variable inputs, showing the different combinations of inputs needed to produce a given level of output.

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Vicky Ramakrishnan
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929 views11 pages

There Are Three Types of Production Function

There are three types of production functions: 1) One with a single variable input 2) One with two variable inputs 3) One with all variable inputs. The production function with one variable input follows the law of diminishing marginal returns, where marginal and average product initially increase with additional units of the variable input, then diminish after a point. It demonstrates three stages of production - increasing returns, diminishing returns, and negative returns. Isoquants represent production functions with two variable inputs, showing the different combinations of inputs needed to produce a given level of output.

Uploaded by

Vicky Ramakrishnan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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There are three types of production

function.

1.Production function with One variable input.

2.Production function with Two variable input.

3.Production function with All variable input.


HOW TO PRODUCE
Production function with One variable input

Law of variable proportion


It is assumed that only one factor of production is
variable while other factors are fixed.

According to prof. Benham:


“As the proportion of one factor in the combination of factors is increased
after a point ,the average and marginal production of that factor will
diminish.”
The condition underlying the law are as follows:

1.Only one factor is varied & all other factor remain


constant.

2.The scale of output remain unchanged & production


plant or the size efficiency remain constant.

3.The technique of the production does not change.

4.All the unit have identical characteristics & equal


efficiency .
Law of diminishing marginal returns

1. Definition:
2. Measurement of product:

•Total product:
TP = F (QVF)
Where TP = total produced .
QVF = Quantity variable factor.

•Average product:
AP = TP/QVF
Marginal product:
MPn = TPn – (TPn-1)
THREE STAGES OF PRODUCTION.
The Total ,Marginal & Average product curve Demonstrate the law of variable proportions
Behavior of TPP,MPP & APP during the three stages of production.

Total physical product. Marginal physical product. Average physical product.


(TPP) (MPP) (APP)
Stage 1.
Increases at an Increases , reaches its max Increases & reaches its
increasing rate. & then decline till MR = AP. max.

Stage2.
Increases at a
Diminishing & becomes = 0 Start diminishing .
diminishing rate till its
reaches max.

Stage3.

Becomes negative . Continues to decline.


Start declining .
Hypothetical production schedule of a firm
Units of variable Total Product(TP) Average Marginal Product(MP)
input(Labour)(n) Product(AP)

1 20 20 20

2 50 25 30
3 90 30 40
4 120 30 30
5 135 27 15
6 144 24 9
7 147 21 3
8 148 18.5 1
9 148 16.5 0
10 145 14.5 -3
Production function with two variable inputs.

Isoquants
Labour & capital inputs in relation to output.

Labour (units) Capital (units) Output (units)

1 5 10
2 3 10
3 2 10
4 1 10
5 0 10
Types of isoquants

1.Linear isoquants.

2.Right angle isoquants.

3.Convex isoquants.
Thank you

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