PRODUCTION

ANALYSIS
 Production: ‘creation of utility’.
• It creates:
• i. Form utility
• ii. Place utility and
• iii. Time utility
 CONCEPTS OF PRODUCTION:

1. Production function
2. Isoquants and Isocost lines
3. Marginal rate of Technical substitution
4. Output elasticity of inputs
 PRODUCTION FUNCTION:

Q=f(land(N),labour(L),capital(K), organisation(O), raw

materials( r) …)

• Short run Production function :( SRPF):

• Long runs Production function (LRPF):
 PRODUCER’S EQUILIBRIUM CONDITION:

ISOQUANTS:
PRODUCTION SCHEDULE:
Combinati X1 X2 Qconst MRTSx1x2
on
A 1 15 200

B 2 11 200

C 3 8 200

D 4 6 200

E 5 5 200
 NUMERICALS:

Q1. Given the Production function => Q= L½K½

and the price per unit of labour(L) and capital(K) to be
Rs.2 and Rs. 4 respectively , determine the optimum
input combination of L and K if the total cost is given
to be Rs.80. Also find the maximum output at this
optimum combination.
 Q2.Given the Production function=>Q100 K0.5 L0.5

determine the optimal input combination given the

total cost to be Rs. 1200. The wage per unit of labour
is Rs. 30 and the price per unit of capital is Rs. 40.
What is the maximum output produced at the point?
 Q3.Given the production function =>Q=LK -80L

where the price of per unit labour is Rs. 60 and the

price of per unit capital is Rs. 30 , find the optimum
input combination by applying the producer’s
equilibrium condition.
 Q4.Given the Production function Q=100K0.5 L0.5
and price per unit of labour to be Rs.50 and price
per unit of capital to be Rs.40, determine the
optimum input combination which will minimise
the cost of producing 1118 units of output. What is
the minimum cost at this point?