What is production?
Production is the transformation of inputs or
What are the three broad categories of inputs
in production?
Define fixed inputs.
Define variable inputs.
What is the short run-in production?
Define the long run-in production.
According to KOUTSOYIANNIS, how is the
production function defined?
How is the production function represented
mathematically?
What is the role of the production function?
Define total product (Q).
Define marginal product (MP).
What is the formula for marginal product (MP)?
Define average product (AP).
What does the production function in short-run
analysis focus on?
Why is it essential to clarify key terms in short-
run production analysis?
How is the marginal product (MP) calculated in
terms of total product (TP)?
What is the significance of average product (AP)
in production analysis?
How is the production function helpful in
determining output levels?
In the long run, what generally happens to
technology in the production process?
What is the role of management (M) in the
resources into outputs of goods and services.
Labour, capital, and land.
Fixed inputs are resources that cannot be
readily changed during the time period.
Variable inputs are resources that can be easily
varied and changed on short notice.
The short run is the time period in which at
least one input is fixed.
The long run is the time period when all inputs
are variable, and technology generally
improves.
"The production function is purely a technical
relation connecting factor inputs and output."
(Q = f(L_d, L, K, M)\), where Q is production, \
(L_d\) is land, L is labour, K is capital, and M is
management.
It defines the relationship between inputs and
the maximum amount that can be produced
within a given period with a given level of
technology.
Total product is the total amount of output
resulting from the use of different quantities of
input.
Marginal product (MP) is the net addition made
to total product (TP) by employing an extra unit
of a variable factor, such as labour.
(MP = \frac{\Delta TP}{\Delta \text{variable
factor}}\) or \(MP_n = TP_n - TP_{n-1}\)
Average product (AP) is the per-unit production
of variable factors and is calculated as \(AP = \
frac{TP}{\text{No. of variable factor}}\).
It focuses on the relationship between inputs
and the amount of output in the short run.
It is essential to understand terms like total
product, marginal product, and average product
for a detailed analysis of short-run production.
(MP_n = TP_n - TP_{n-1}\)
Average product (AP) provides insight into the
per-unit production of variable factors.
The production function helps determine the
maximum amount that can be produced with a
given level of technology and inputs.
In the long run, technology generally improves,
allowing more output from a given quantity of
inputs or the same output from less input.
Management (M) is one of the factors in the
production function?
What is the Law of Variable Proportion?
What is another name for the Law of Variable
Proportion?
What does the Law of Variable Proportion state
about the relationship between variable and
fixed inputs?
When does the Law of Variable Proportion
occur?
What are the assumptions of the Law of
Variable Proportion?
How is the Law of Variable Proportion related to  Firm changes only the amount of labor
changing the amount of labor in a firm?
What happens to the total output as labor is
increased in the short run?
What is the maximum total product in the table
when 7 units of labor are used?
What is the Marginal Product (MP) of labor for
the 2nd unit in the table?
What happens to the Marginal Product of labor
as more units of labor are added?
How does the Average Product (AP) of labor
change?
In the Law of Variable Proportion, what factors
are assumed to remain constant?
What is meant by changing the proportion
between fixed and variable inputs?
What is the Law of Diminishing Returns?
How does the Law of Variable Proportion relate
to the short run?
Define homogeneous variable factors.
What does the Law of Returns to a Factor
imply?
production function, contributing to the overall
transformation of inputs into outputs.
 Short-term concept
 Change in the quantity of variable factors
 Fixed factors remain constant
 Total output initially increases, then at a
constant rate, and finally at a diminishing
rate
Law of Returns to a Factor
As more variable input is applied, total output
initially increases, then at a constant rate, and
eventually at a diminishing rate
In the short term
 Unchanged state of technology
 Unchanged input prices
 Homogeneous variable factors
 Change in the quantity of one factor while
others are constant
 Alters the proportion between fixed and
variable inputs
Initially increases at an increasing rate, then at a
constant rate, and eventually at a diminishing
rate
15
3
Increases to 4 and ultimately becomes negative
Initially increases and then falls
Technology and input prices
Altering the quantity of labor while keeping
other factors constant
Additional units of variable factors yield
diminishing marginal returns to total product
It is a short-term concept
Variable factors are similar or of the same type
One factor is varied while keeping all other
factors fixed
What is the impact of changing the amount of
labor on the proportion between fixed and
variable inputs?
What is the Law of Returns to a Factor also
known as?
In the Law of Variable Proportion, what is
assumed about the state of technology?
What are the three stages of production in the
short run production function?
Describe the characteristics of the first stage of
production.
What defines the second stage of production?
Explain the features of the third stage of
production.
When does the first stage of production end?
What characterizes the end of the second stage
of production?
When does the third stage of production start?
What happens in the first stage to total product
(TP) and average product (AP)?
Describe the trend of marginal product (MP) in
the first stage.
Alters the proportion between fixed and
variable inputs
Law of Variable Proportion
It remains unchanged
1. First stage: Origin to point R, where AP is
maximum, AP=MP, TP increases at increasing
rate, MP reaches maximum and starts
decreasing, AP increases to maximum where
AP=MP.
2. Second stage: Point R to point S, where
MP=0, TP increases at diminishing rate, MP
decreases to zero, AP begins to decrease.
3. Third stage: Point S onward, where MP=0 and
TP is maximum, entire range of negative MP, TP
falls, MP becomes negative, AP continuously
diminishes.
- Origin to point R.
- AP is maximum, and AP=MP.
- TP increases at an increasing rate.
- MP reaches maximum and starts decreasing.
- AP increases to its maximum where AP=MP.
- Point R to point S.
- MP=0.
- TP increases at diminishing rate.
- MP decreases to zero.
- AP begins to decrease.
- Starts from point S.
- MP=0 and TP is maximum.
- Entire range of negative MP.
- TP begins to fall.
- MP becomes negative.
- AP continuously diminishes.
- At point R.
- Where AP is maximum and AP=MP.
- MP reaches maximum and starts decreasing.
- At point S.
- Where MP=0.
- TP increases at diminishing rate.
- MP decreases to zero.
- AP begins to decrease.
- From point S onward.
- Where MP=0 and TP is maximum.
- TP increases at an increasing rate.
- AP increases and reaches its maximum where
AP=MP.
- MP firstly increases, reaches maximum, and
then starts decreasing.
What occurs to total product (TP) in the second
stage?
When does average product (AP) begin to
decrease in the second stage?
Explain the behavior of marginal product (MP)
in the second stage.
In the third stage, what happens to total
product (TP) and marginal product (MP)?
When does the average product (AP)
continuously diminish in the third stage?
What is the relationship between average
product (AP) and marginal product (MP) in the
first stage?
At what point does marginal product (MP)
become zero in the second stage?
When does total product (TP) reach its
maximum in the second stage?
What is the trend of marginal product (MP) in
the third stage?
In the third stage, what happens to total
product (TP)?
Summarize the key idea regarding the stages of
production
What is the first cause of the Law of Variable
Proportion?
How does the fuller utilization of fixed
indivisible factors affect the marginal
productivity of the variable factor?
What is the second cause of the Law of Variable
Proportion?
How does the employment of more labor affect
factor ratio, and what is the consequence on
marginal productivity?
What is the third cause of the Law of Variable
Proportion?
Why does marginal productivity decrease in the
presence of non-availability of a substitute
factor?
Where are the stages I and III in the production
process, and why are they not rational choices
for a producer?
Where does a rational producer choose to
produce according to the Law of Variable
Proportion?
When does a rational producer stop
production, even if the variable factor is free?
TP increases at a diminishing rate and reaches
its maximum.
AP begins to decrease from point R to point S.
MP decreases and becomes zero at point S.
- TP begins to fall.
- MP becomes negative.
AP continuously diminishes in the third stage.
AP=MP in the first stage.
MP becomes zero at point S.
TP reaches its maximum at point S.
MP becomes negative in the third stage.
TP begins to fall in the third stage.
More variable factors with fixed factors lead to
stages where MP of a factor starts diminishing.
Indivisibility of fixed factors and its fuller
utilization.
- Increases marginal productivity.
- Advantage of division of labour in initial
stages.
The deterioration in factor ratio.
- Disturbs factor ratio.
- Reduces marginal productivity.
Non-availability of substitute factor.
- No substitution available.
- Factor ratio disturbance leads to diminishing
marginal productivity.
- Stage I: Fixed factor too much relative to
variable, negative marginal product of fixed
factor.
- Stage III: Variable factor too much relative to
fixed, negative marginal product of variable.
Not chosen for rational production due to
technical inefficiency.
Stage II represents the range of rational
production decisions.
At the end of the second stage, where the
marginal product of the variable factor is zero.
What determines the particular point of
production according to the Law of Variable
Proportion?
What is the application of the Law of
Diminishing Returns mentioned in the notes?
In which type of production does the Law of
Diminishing Returns operate more regularly,
and why?
What role do natural factors play in agricultural
production according to the notes?
Why is there uncertainty in agricultural
production, according to the notes?
What is the consequence of the Law of
Diminishing Returns in agriculture?
Which type of factors predominantly influence
industrial production?
Why does the Law of Diminishing Returns
operate less regularly in industrial production?
What is the main reason for the operation of
the Law of Diminishing Returns in agricultural
production?
What determines the occurrence and intensity
of the Law of Variable Proportion in different
production activities?
Prices of the factors.
Law of diminishing returns may operate quickly
in some productive activity, in some of its
operation may be delayed, and in some others,
it may not appear at all.
Operates more regularly in agricultural
production because natural factors play a
predominant role, and uncertainty in factors
like rainfall influences production, leading to
less marginal returns and high cost.
Natural factors, such as rainfall, play a
predominant role and greatly influence
agricultural production.
Uncertainty arises due to the unpredictable
availability of rainwater, leading to the
operation of the Law of Diminishing Returns
under cultivation.
Less marginal returns and high cost of
production.
Man-made factors play a major role in industrial
production.
Man-made factors play a major role, and
natural factors are less influential, leading to
less regular operation of the law.
Natural factors, especially rainfall, greatly
influence agricultural production, leading to the
regular operation of the law.
The nature of factors, whether natural or man-
made, and their role in the production process
determine the occurrence and intensity of the
Law of Variable Proportion.