Page 161 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes (ii) Average Product (AP): The average production means the average product of a variable factor
is simply the total product of the factor divided by the total units of the variable factor. By this
we can get average product of every units of variable factors.

TP
___

AP =
L
(Here AP = Average Product; TP = Total Product; L = Variable factors like total units of worker)
(iii) Marginal Product (MP): Marginal product of a variable factor is the change in total product
resulting from the use of one more or one less unit of variable factor.
In other words, the Marginal Production is the measurement of the changes of total production due to
the changes of quantity of variable factors.

____

MP = ∆TP
∆L
(Here MP = Marginal Product; ∆TP = Changes in Total Product; ∆L = Changes in variable factors
like labour.)

Self Assessment

Fill in the blanks:
1. The production function states the technical or physical relation between ............................ .
2. The production function is the table (mathematical function), which represents the maximum
............................
3. One fixed inputs in production means the ............................ production in every time of frame.

8.5 Laws of Production

The law of production describes those methods which show the increase in production by technical
point of view. The production can increase by many methods. We have already read while analyzing
the nature of production function that the production can be increased by increasing variables in short
run. So the process of changing the quantity of production when all the factors are stable and only the
variable inputs are changed is called Return to a Factor. As opposite the production can be increased by
increasing all the factors in long run. Return to the scale means the process to change the production by
changing all factors and inputs. So, there are two laws of production:

8.6 Returns to a Factor: Law of Variable Proportions

If the use of variable inputs with the fixed inputs in a short run then it uses Law of Variable Proportions.
The law of variable proportion is the law which represents the changes in total production by using
various averages of fixed and variable inputs and factors.
When a factor of production is increased but all other factors are fixed, then it changes the averages
of factors. Suppose that the factors of production are two – Land and Worker. Land is a fixed factor.
Worker is a variable factor. Suppose you have two hectares of land. You grow tomato with the help
of one worker. So the ratio of labour and land would be 1:2. If you increase the worker as 2 then this
ratio would be 2:2. Means initially there is two hectares land for a worker and now it is per worker one
hectare. Thus if there is the change of ratio of factors, the rates of quantity of production would change.

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