![]() Production function is a concept that explains the relationship between quantities of input and the output. Negative Returns: This happens as the efficiency of both negative and fixed factors falls and the quantity of fixed factors begins to decrease or fall.Diminishing Returns: This happens as the combination of factors becomes less optimum and because the variable and fixed factors become imperfect substitutes of one another.Increasing Returns: It states that a better utilisation of factors leads to an increase in the efficiency of these factors and thus increases overall output.There are several reasons for the law of variable proportions, three of which are:.Here, both total product and marginal product decrease. Negative Returns: In this phase, the output begins to decrease at a diminishing rate.In the second phase, the total product increases but the marginal product starts decreasing but is positive. Diminishing Returns: This stage is when the quantity of output increases but at a decreasing or diminishing rate.This phase sees an increase in both the total product and the marginal product. Increasing Returns: In this phase, the increase in one input leads to increase in the quantity of output at an increasing rate until it reaches its highest point.The proportion of variable factor units can be changed.The price of input or factors of production are fixed.The condition of technology is given and is fixed.It operates on the short run production function.Only one input will be variable, others are fixed.Total product refers to the total amount of goods and services produced within the given input in a specific period of time.The Law of Variable Proportions states that as the quantity of only one input increases, the total product first rises at an increasing rate, then at a decreasing rate, finally the total output ends up falling.As both marginal and average product fall, the marginal product falls at a greater rate and eventually becomes negative, while average product remains positive.As the marginal product becomes more than the average product, the average product decreases.When the average product is greater than the marginal product, the average product increases.The relationship between average product and marginal product can be explained as:.Finally, as the total product begins to decrease, the marginal product falls and becomes negative.The increase of total product at a diminishing rate causes the marginal product to decrease.An increase in total product at an increasing rate results in an increase in marginal product. ![]()
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