Laws Of Returns

Front 1

Cost of production depends upon...?

Back 1

1. Input prices

2. Physical relation between inputs and outputs

Hint 1

$ + <3

Front 2

Theory of production

Back 2

Study of relationship between inputs and outputs

Hint 2

<3

Front 3

Theory of costs

Back 3

A study of relationship between output and cost of production.

Hint 3

Diff <3

Front 4

Compare production in layman terms and in economic terms.

Back 4

Layman terms - Creation of material or tangible goods.

Economic terms - Act of making goods/services thereby adding utility.

Hint 4

Make stuff

Create utility

Front 5

Production function

Back 5

Functional relationship between inputs and outputs.

Qx = f ( labour, capital)

Hint 5

<3

Front 6

Important points about production function

Back 6

1. Flow concept

2. Physical terms

3. Depends on state of technology

Hint 6

Watch body robot

Front 7

Implication of production function

Back 7

It shows max quantity of a commodity that can be produced per unit time with the given amount of inputs, when the best production technique available is used.

OR

It is the min amount of inputs required to produce a certain level of output with use of best available technique of production

Hint 7

Max min

Front 8

Short run

Back 8

Period of time during which the amount of some inputs called fixed factors cannot be changed.

Hint 8

Fixed

Front 9

Long run

Back 9

Period of time during which all factors of production can be varied.

Hint 9

All factors

Front 10

Short run production function

Back 10

A situation when only one input is variable and all other inputs are assumed to be constant.

[Returns to a factor]

Front 11

Long term production function

Back 11

A situation when all inputs are used in production and are changed simultaneously in the same proportion.

Front 12

Total physical product

AKA total returns

Back 12

Total amount of a commodity produced during some specific period of time by combining a particular quantity of a variable factor with a given quantity of a fixed factor.

Hint 12

Total when little bit of variable with fixed. Watch

Front 13

Average physical product

AKA Average returns

Back 13

Average product of a variable factor refers to output per unit of that variable factor.

Hint 13

AP (L) = TP (L) / L

Front 14

Marginal physical product

AKA marginal returns

Back 14

Change in total product resulting from one additional unit of a variable factor.

Hint 14

MP (L) = Change in TP / Change in L

Front 15

Returns to a factor

Back 15

Change in output when quantity of one factor is increased while others remain constant.

Three situations :

1. Increasing

2. Decreasing

3. Diminishing

Front 16

Law of variable proportions

Back 16

The law of variable proportions states that as more units of a variable factor are applied to a given quantity of a fixed factor, total product may increase at an increasing rate initially, but eventually increase at a diminishing rate.

Hint 16

Up first down later

Front 17

Assumptions of law of variable proportions

Back 17

1. State of technology is constant

2. Some inputs are fixed and others variable

3. Technology can change variable inputs at varied proportions. ( not fixed )

4. All units of variable factor are homogeneous.

Hint 17

Robot constant

Fixed + not fixed

Variable not fixed

Homo

Front 18

CAUSES -

1. Increasing returns

2. Diminishing returns

3. Negative returns

Back 18

1.

(a) Full utilisation of fixed factors

(b) Division of labour

2.

(a) Distrubing the optimum proportion

(b) Imperfect substitutablity

3.

(a) Overcrowding

(b) Management problems

Front 19

Returns to scale

Back 19

When all inputs are changed in the same proportion then - change in scale of production.

Change in output due to change I'm scale of production is the law of returns to scale

Front 20

Differences between law of variable proportions and returns to scale

Back 20