bba law of variable proportions
DESCRIPTION
various laws of proportionTRANSCRIPT
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Production refers to the transformation of resources into
outputs of goods and servicesFOR INSTANCE : General motors (G.M.) hires workers who use machinery in factories to transform steel , plastic , glass , rubber , etc into
AUTOMOBILES Steel + Plastic + Glass + Rubber + Motor parts = CRUZE
PRODUCTION FUNCTION : It’s the functional technical relationship between physical inputs and outputs of a firm.
P = F [ L, K , S ]
Factor of production
In economics, factors of production (or productive inputs or resources) are any commodities or services used to produce goods and services.
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FIXED AND VARIABLE INPUTS
• FIXED FACTOR OF PRODUCTION :• It is defined as the quantity of which cannot be changed in
the short run as the level of output changes e.g. building , plants , supply of skilled labour.
• VARIABLE INPUTS It is defined as the one in which the quantity may be changed
in the short run as the level of output changes. Some examples are raw material , Labour services.
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HOW WILL TOTAL OUTPUT CHANGE WHEN ALL INPUTS EXCEPT FOR ONE
ARE FIXED ?
This law states that as one variable factor is combined with other fixed factor of production then the proportion of the factors is changed and the TP at first rises more than proportionately , then equiproportionately , finally less than proportionately.
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(1) Only 1 factor is variable.(2) All units of variable factors are
same.(3) Technique of production is
constant.(4) Factor’s of production can be
used in different proportions.
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Title
BEHAVIOR TP MP
STAGE 1 TP increases at increasing rate
Increasing
STAGE 2 TP increases at diminishing rate becomes MAX &
CONSTANT
BECOMES max & STARTS falling , becomes ZERO.
STAGE 3 TP starts falling IT becomes NEGATIVE 8
SCHEDULE
Units of LabourUnits of Labour TPTP MPMP
I StageI Stage
II StageII Stage
III StageIII Stage
11 8080 8080
22 170170 9090
33 270270 100100
44 368368 9898
55 430430 6262
66 480480 5050
77 505505 2424
88 505505 00
99 495495 -9-9
1010 470470 -25-25
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STAGE OF RATIONAL DECISION
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THE GREATEST OUTPUT IS AT THE END OF STAGE 2. THEREFORE STAGE 2 IS IDEAL BECAUSE
THERE IS BALANCE BETWEEN PRODUCTIVITY AND TOTAL
OUTPUT.
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