Page 89 - DECO101_MICRO_ECONOMICS_ENGLISH

Micro Economics Dilfraz Singh, Lovely Professional University

Notes Unit 7: Production Theory

CONTENTS

Objectives
Introduction
7.1 Meaning of Production and Types of Inputs used in Production
7.2 Production Function
7.2.1 Short Run and Long Run Production Function

7.2.2 Production Function with two Variable Inputs
7.3 Isoquants
7.3.1 Types of Isoquants
7.3.2 Characteristics of Isoquants

7.3.3 Marginal Rate of Technical Substitution
7.4 Isocost Lines
7.5 Producer’s Equilibrium
7.6 Expansion Path
7.7 Summary

7.8 Keywords
7.9 Self Assessment
7.10 Review Questions
7.11 Further Readings

Objectives

After studying this unit, you will be able to:
List the types of inputs
State various production functions
State the concept of isocost lines

Discuss producer’s equilibrium
Explain the concept of expansion path

Introduction

The production analysis of the firm brings into focus the process of production and related costs

of production. We must take inputs into consideration applied for production and resulting

into output. There are different methods to produce a commodity. The firm has to identify the

technically efficient production processes for avoiding any wastage of resources. These technically
efficient production processes provide a choice for choosing the least-cost process.

Major portion of goods and services consumed in a modern economy are produced by fi rms. A
firm is an organisation that combines and organises resources for the purpose of producing goods

84 LOVELY PROFESSIONAL UNIVERSITY