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The Theory of Production

The Theory of Production. By: Dalia Campos & AJ Coleman. What is the theory of production?. Theory Of Production ;. Theory dealing with the relationship between the factors of production & the output of goods & services.

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The Theory of Production

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  1. The Theory of Production By: Dalia Campos & AJ Coleman

  2. What is the theory of production? Theory Of Production; Theory dealing with the relationship between the factors of production & the output of goods & services. The theory of production is generally based on short-run and long-run. For example getting a job over the holiday season is short-run while getting a career is a long-run.

  3. Short Run Production period so short that only variable inputs can be changed Long Run Production period long enough to change amount of variable & fixed inputs used in product.

  4. Law Of Variable Proportion Rule stating that short-run outputs will change as one input is varied while others are held.

  5. Raw Material Unprocessed natural resources used in production Examples of Raw Material; Timber, Iron Ore, Coal, Gold, Silver, Grain, Animals, Tobacco, Sugar, Spices

  6. Total Product Total output produced by a firm. Total product curve

  7. Marginal Product Extra output due to the addition one more unit of input.

  8. Stage of Production Three Stages Of Production: Stage I; In this stage the company will increase productivity. Stage II; Illustrated the principal of diminishing returns, the stage where output increases at a diminishing rate as more units of a variable inputs are added. Stage III; In this stage a non-mixed factor is added or increase output ceases to increase and may even begin to decrease. Phrase of production increasing, decreasing and negative returns

  9. Diminishing Returns Stage of production where output increases at a decreasing rate as more units of variable input are added.

  10. Questions • The relationship between the factors of production and the output of goods & services • Short run is temporarily and Long run is permanent • Wood, Coal, Iron & Plastic • First stage is that the company increases productivity Second Stage the total production keeps growing little by little, making more supply to sell to buyers. Finally in Stage 3 marginal production becomes negative meaning production decreases. • Marginal production decreases. • What is the theory of production? • How are short-run and long-run different? • What are some examples of Raw Material? • How do the three stages of Production work? • What happens after the second stage of production?

  11. THE END

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