Production Function

 

1. Output
   
2. Input
   
3. Q= f(K,L,La)
   
4. Law of Qiminishing marginal returns.
   
5. Total product (TP/Q)
   
6. Average product
   
7. Marginal product
   
8. Productivity
   

 

Factor of Production:-

 

*LAND:-Land is the natural resources on the planet. It includes space on the ground, hills, seas, air etc.

 

*LABOUR: - Labour is the human input (workers, managers etc.) into the production process.

The UK has about 58 million people of which approximately 35 million are of working age.

Each individual has a different level of skills qualities and qualifications. This is known as there HUMAN CAPITAL.

 

*Capital: - Man made physical goods used to produce other goods and services. Examples include machine, computers, tools, factories, roads etc. Increases in the level of capital are called Investment.

 

*ENTERPRISE:- The entrepreneur provides the initial ideas.

 

 

 

 

They risk their own resources in business ventures. They also organize other 3 factors of production.

 

The theory of the firm

 

• Revenue
  
• Costs
  
• Profit
  
• Production function
  

 

Costs

 

• Total costs(FC+VC)
  
• Variable (Direct) costs.
  
• Fixed (Indirect or overhead) costs.
  
• Average costs (TC/Q)
  
• Marginal costs
  
• Opportunity cost.
  
• Short run
  
• Long run
  

 

 

 

• . Variable cost is the cost directly related to output
  

 

 

• Marginal cost is the cost included to produce one additional unit.
  

MC = TCn – TCn - 1

 

• Opportunity cost is the cost beared of losing second best alternative