Sunday, 23 February 2020

Laws of Production

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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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