Page 117 - DECO101_MICRO_ECONOMICS_ENGLISH

Micro Economics

Notes

Tasks Production managers of a company estimate that their production process is
currently characterised by the following short run production function:
Q = 72X + 15X – X
3
2
where,
Q = Tonnes of boxes produced per production period and

X = units of variable input employed per production period.
1. Graphically illustrate the production function, indicating the following:
(a) the range of increasing returns
(b) the range of decreasing returns.
2. Determine the equation for the MP and AP of the variable factor.

3. What is the marginal product when seven units of the variable input are
employed?
4. What is the maximum output capability per period?

Caselet Apache Aims to Double Adidas Shoe Production
pache Footwear India, the manufacturer for Adidas shoes in India, aims to double
production of shoes from its special economic zone (SEZ) here to 8 lakh pairs a
Amonth by 2014.

At present, about four lakh pair of shoes are produced every month from the SEZ, located
in Mambattu village of Nellore district.
“We have a target to double the production of shoes to 8 lakh pairs per month by 2014,”
Apache Footwear General Manager Phillip Chen said.
The company’s SEZ, spread over 314 acres, recorded a turnover of ` 240 crore in 2010 and
provides employment to about 6,300 people.

The company also plans to set up a development centre and supply centre in the state.
These centres would help reduce the time taken for production of shoes.
“We are expecting that the turnover will increase to ` 300 crore this year,” Chen said,
adding that a proposed supplier park will help the firm bring down the lead time for

production from two months at present to just fi ve days.
Apache exports its shoes mainly to Europe, the US and Russia.

Chen said the firm is also trying to convince Adidas to buy raw material from India. “We
are importing the entire raw material mainly from China, Vietnam and Indonesia,” he
added.
Germany-based Adidas is a leading sports apparel and equipment manufacturer.
Source: www.business-standard.com

112 LOVELY PROFESSIONAL UNIVERSITY