There is a study of the relationship between the inputs and the outputs which is known as theory of production. whereas theory of costs is the study of relationship between the output and cost of production.Laws of returns
this theory of cost and the theory of production give a further understanding of the transactions in any economy and thus become important concepts. Thus, students mostly need assignment help to understand the same.
Production in an economy is the act of making goods and services and also adding utility to the object which makes the object useful.
Production function refers to the maximum quantity of a commodity which is produce at a particular time through the given amount of inputs at the time when the best production technique available were use.
It is expresse with particular period of time. It expresses a physical relation between inputs and outputs. Production function purely describes technical relationship between input and output.
There are various types of production functions important to be note for or assignment help in Economics:
- Short-run production function:
When only one input is keep variable while all the others are assume to be constant, then that situation is call short-run production function. It is a subject matter of returns to a factor.
- Lon-run Production function:
Long-run production function refers to a situation when all the inputs which were use in producing a commodity are change simultaneously in the equal proportion. It is a subject matter of returns to scale.
Basic Concepts: –
- Total product:
Total product is the total amount of a commodity which can be produce combining a particular quantity of variable factor with the quantity of fix factor, which is give, in a specific period of time.
- Average product:
The output per unit of variable is know as average product.
- Marginal product:
Marginal product refers to a change in the total product due to use of one additional unit of a variable factor.
Returns to a factor:
It refers to a change in output when only one factor is increase while other remains constant. It operates in the short-run and is associate with short-run production function. Returns to a factor has three possibilities:
- Increasing returns to a factor:
It is a situation when total output is add more and more amount each unit of variable factor which is combine with a fixed factor.
- Constant returns to a factor:
It is a situation when total output is add some amount each unit of variable factor when variable factor has its marginal product constant.
- Diminishing returns to a factor:
It is a situation when total output is add lesser and lesser amount each unit of variable factor when marginal product of factor falls when more of it is use.
Law of variable proportion
This law tells us that total product might increase at increasing rate initially and it might decrease at diminishing rate eventually when more and more unit of variable factor are use on the quantity of fixe factor which is give. This law has some assumptions too, which are as follows:
- It is assume that technology is being give to us which remains unchange.
- this is being assume that there are some inputs which are keep fix while other are keep variable.
- this is assume that technology allows change in variable factor.
- It is being assume that all the units of variable factor are equally efficient and homogeneous.
Explanation of the law of Variable Proportion: –
Causes of increasing returns:
There are the following reasons which tells us about the increasing returns in Stage 1:
Fuller utilization of fixed factors:
Whatever be the level of output, certain minimum quantity of fix factor is mandatory to be use due to technical reasons. Hence, to make optimum use of the fixed factor, certain minimum labor is does required. Thus, if number of labors is increase, the fix factor is utilize better and more efficiently which results in increase in the variable factor’s marginal product.
Increase in efficiency:
the efficiency of variable factor increases with increase in the number of variable factors which also leads to division of labor and specialization becomes possible. The labor can work according to their skills and attitude which results in increase in their efficiency. Laws of returns
Causes of diminishing return:
This return arises due to following reasons:
Disturbing the optimum proportion:
As we increase the variable factor in quantity of fixed factor, output increases, but this will happen only up to optimum point of production where fixed factors work in their fixed productive efficiency. Even if variable factor is increase beyond this point, total product will decrease rather than increasing.
Imperfect Substitutability of Factors of Production:
In order to increase the production of a commodity, factors of production can only be substitute only up to a certain level. If we try to keep on substituting one factor on other, total product will decrease rather than increasing. Laws of returns
Causes for negative return:
The concept of negative return in Stage 3 can only be explain with the following points:
if inly variable factor is increase for a give quantity of a fixe factor, it will hinder the working of variable factor as there will be lower availability of tools and equipment which will reduce productivity. Too many workers will come in each other’s way which causes delay and disturbance, as a result reduced production. Laws of returns
When there are too many workers, it becomes difficult for the management to supervise, direct and coordinate them. The laborers may avoid them which might decrease their efficiency.
If you understand the law of return and the theories behind it then you can easily understand the concepts of market functioning and thereby the functioning of any economy. The points mentioned above can easily facilitate the learning of these concepts and provide help in homework to students facing difficulties.