Tuesday, 5 November 2019

Unit 7: Laws of Production


                                          Unit 7: Laws of Production  

The law of variable proportion of says that as more and more of the factor input is employed, all other input quantities remaining constant, a point will eventually be reached where additional quantities of varying input will yield diminishing marginal contributions to total product.

Returns to scale are classified as: (a) Increasing Returns to Scale (IRS), (b) Constant Returns to Scale (CRS) and (c) Decreasing Returns to Scale (DRS).

Fixed inputs: Inputs that cannot be readily changed during the time period under consideration  Inputs: Resources used in the production of goods and services  Long-run: The time period when all inputs become variable  Short-run: The time period during which at least one input is fixed  Variable inputs: Inputs that can be varied easily and on very short notice    

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