Short Period Analysis of Production
The short run is a period of time in which only one input (say labor) is allowed to vary while other inputs land and capital are held fixed. In the short run, therefore, production can be increased with one variable factor and other factors remaining constant. In the short run, the law of variable proportion governs the production behavior of a firm.
The law of variable proportion shows the direction and rate of change in the output of firm when the amount of only one factor of production is varied while other factors of production are held constant.
The law of variable proportion passes mainly through two phases:
(i) Increasing Returns
(ii) Diminishing Returns
Technical Efficient Combination
Production function establishes a physical relationship between output and inputs. It describes what is technically feasible when the firm uses each combination of input. The firm can obtain a given level of output by using more labor and less capital or more capital and less labor. Production function describes the maximum output feasible for a given set of inputs in technical efficient manner
Production Function takes Quantities of Inputs
It is imperative to note that production function does not take into account the prices of input or of the output. It simply takes into account the quantities of inputs which are employed to produce certain quantities of output.
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