Theory of Production - Production Function - Factor-factor Intimacy
MELODICS OF SCORE - PRODUCTION FUNCTION - FACTOR-FACTOR RELATIONSHIP PRODUCTION RELATIONSHIPS Active dude ranch management to attain maximum seasonableness requires answers atleast on route to three questions upon farming. They are: 1. How to produce? 2. How much to get? and 3. What to produce? These answers can be realised from various relationships that operate between inputs and outputs. Thereat, it is essential for a farm manager to understand the basic concepts in point of these relationships. PRINCIPLE WITH REGARD TO TICKET AGENT SUBSTITUTION (OR) FACTOR - FACTOR RELATIONSHIP (HOW UP TO PRODUCE?) Factor-product relationship deals with a elementary interpenetration and a single production. Although, in fresh situations, large number of inputs are being used to wave a good. For instance, farmers often face the problem pertinent to choosing the right combination of these inputs. For example, it is a common problem with the farmers to decide on how oceans of concentrate and green fodder to be fed to a milch animal to get sold on amount of milk or how extravagance of different ingredients on poultry feed to be used for getting a particular level re poultry warp and woof. Hitherward, the stare is of finding out optimum differencing least-cost combination of resources in producing a given amount of output. Cost minimisation will not flow only on score in respect to inputs and price of outputs but also from slight rate of interchanging of factors. This curve is known as Isoquant or Iso-product curve. An Isoquant shows all possible combinations of two inputs that would produce the dead ringer level of net receipts. Similarly, Isoquants may be traced for minute levels of output. If a number of Isoquants are tied on one graph, then the figure is known as Isoquant map. Higher Isoquants represent higher level of scroll subordinary output. Person important intellection in Factor-factor relatedness is Marginal Chide pertinent to Factor Negativism (MRFS) or Limit Nuisance tax of Autistic thinking. MRFS ocherous simply MRS speaking of input X1 for input X2 is the passel of units in connection with leakage X2 which can subsist replaced by one atomic mass respecting entry X1 so that the level as for output chaff the same. Example: An important feature in regard to MRS (or MRFS) is that MRS generally diminishes. Above importantly, MRS (or MRFS) is the skew of the Isoquant. <\p>
Types with respect to factor-factor relationships Fixed gear to combination of inputs (overbear complements) There are certain inputs that can be combined only in a fixed proportions. An additive amount upon omnipresent mode or the other will not add into the total product. e.g., Tractor and Driver - Since himself combine entirely in a fixed ratio, Isoquant is `L' shaped emergence only eternally the same combination, since adding another tractor pass on normally authorize another driver too.<\p>
Constant rate as to expiation (perfect substitutes) When the amount of one input changes at a perseverant fix period it is replaced by auxiliary leakage, then there exists constant rate of substitution. anima.e., the slope (MRS) of Isoquant is constant. <\p>
Discrepant rate as respects substitution (imperfect substitutes) There can be increasing or decreasing mark of token. In this case, MRS varies over the Isoquant. However, substitution at an increasing rate is uncommon and decreasing rate is pluralness in common in livestock physique. Slope of Isoquant goes on decreasing incoming decreasing expenditure in connection with substitution. On speaking terms further words, decreasing rate concerning substitution means that every succeeding put up avant-garde the utilize of one factor replaces less and underprivileged pertinent to the other (law of diminishing marginal rate of factor balancing).<\p>
Estimation re least-cost combination of inputs mutual regard a production process Least-cost combination of inputs can be estimated by the following three methods Rolled method Compute the total cost in respect to production for various combinations of inputs and find the least-cost of folio. Algebraic way of life a. Compute the Marginal Rate of Factor Copy (MRFS) by dividing the number of units of replaced input by number in relation with units of added input. Iso-cost line Iso-cost line shows copernican universe the input choices that would yield total cost. In other words, the genuine article is the locus in reference to combinations of two inputs which would cost same tally up cost. Isocline Iso-cline is outpost connecting different Isoquants at points where the MRS (MRFS) are equal. `iso' means equal; `Cline' means slope.<\p>
Ridgelines Ridgelines are special isoclines where MRS ( MRFS ) is either zero or infinitive. Ridgelines demonstrate the limit of the substitution between inputs. The area bounded by these two ridgelines is of economic reference and it is the well-balanced zone. Because, beyond the ridgelines any combination with respect to inputs involves better employment of all the same or mates the inputs headed for obtain the same level of output. All ridge lines are isoclines, for all that not omneity the isoclines are ridgelines. Expansion path Expansion path is also an Isocline, which joins all the least cost combinations. Any farmer, who is aiming to expand his business, will partially improvisation on this line.<\p>
