PPT - Production and Costs | Economics Class 11 - Commerce PDF Download

 Page 1


Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
Part 6 
Contents 
Introduction  
 
Concept of production function – Isoquants, MRTS 
 
 
Concept of Total Product, Average  & MarginalProduct   
 
 
Short Run and Long Run analysis of production 
 
The Law of Variable proportion – Returns to scale 
 
Production Cost – Concept of Cost, Classification of 
Short run cost – Longrun cost 
Page 2


Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
Part 6 
Contents 
Introduction  
 
Concept of production function – Isoquants, MRTS 
 
 
Concept of Total Product, Average  & MarginalProduct   
 
 
Short Run and Long Run analysis of production 
 
The Law of Variable proportion – Returns to scale 
 
Production Cost – Concept of Cost, Classification of 
Short run cost – Longrun cost 
Introduction 
Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
? Production is a very important economic activity.  
? It is important both from the individual as well as the social points of view. 
? The standard of living of a people is the ultimate analysis which depends on 
the volume and variety of production. 
? The performance of an economy is judged by the level of its production. i.e. 
Those countries which produce goods in large quantities are rich and those which 
produce little of them are poor. 
? The process of growth or development consists of increasing level of 
production in the economy. 
 The term ‘Production’ in economics refers to the creation of those goods and 
services which have exchange value. The process by which man utilises or 
converts the resources of nature, working upon them so as to make them satisfy 
the human wants.  
“Production as any activity whether physical or mental, which is directed to the 
satisfaction of other people’s wants through exchange.” – Prof. J. R. Hicks 
Part 6 
Page 3


Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
Part 6 
Contents 
Introduction  
 
Concept of production function – Isoquants, MRTS 
 
 
Concept of Total Product, Average  & MarginalProduct   
 
 
Short Run and Long Run analysis of production 
 
The Law of Variable proportion – Returns to scale 
 
Production Cost – Concept of Cost, Classification of 
Short run cost – Longrun cost 
Introduction 
Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
? Production is a very important economic activity.  
? It is important both from the individual as well as the social points of view. 
? The standard of living of a people is the ultimate analysis which depends on 
the volume and variety of production. 
? The performance of an economy is judged by the level of its production. i.e. 
Those countries which produce goods in large quantities are rich and those which 
produce little of them are poor. 
? The process of growth or development consists of increasing level of 
production in the economy. 
 The term ‘Production’ in economics refers to the creation of those goods and 
services which have exchange value. The process by which man utilises or 
converts the resources of nature, working upon them so as to make them satisfy 
the human wants.  
“Production as any activity whether physical or mental, which is directed to the 
satisfaction of other people’s wants through exchange.” – Prof. J. R. Hicks 
Part 6 
Introduction 
Part 3 
Part 4 
Part 5 
Production consists of various processes to add utility to natural resources for 
gaining greater satisfaction from them by: 
1. Changing the form of natural resources. 
2. Changing the place of the resources. 
3. Making available materials at times when they are not normally available. 
4. Making use of personal skills in the form of services. 
Part 6 
Thus the entire process of production is nothing but creation of form utility, 
place utility and/or personal utility. 
Assumptions: 
a) Specified period of time. 
b) Technical knowledge does not change. 
c) Most efficient technique available. 
d) Factors of production are divisible into 
units. 
Part 2 
Part 1 
Page 4


Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
Part 6 
Contents 
Introduction  
 
Concept of production function – Isoquants, MRTS 
 
 
Concept of Total Product, Average  & MarginalProduct   
 
 
Short Run and Long Run analysis of production 
 
The Law of Variable proportion – Returns to scale 
 
Production Cost – Concept of Cost, Classification of 
Short run cost – Longrun cost 
Introduction 
Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
? Production is a very important economic activity.  
? It is important both from the individual as well as the social points of view. 
? The standard of living of a people is the ultimate analysis which depends on 
the volume and variety of production. 
? The performance of an economy is judged by the level of its production. i.e. 
Those countries which produce goods in large quantities are rich and those which 
produce little of them are poor. 
? The process of growth or development consists of increasing level of 
production in the economy. 
 The term ‘Production’ in economics refers to the creation of those goods and 
services which have exchange value. The process by which man utilises or 
converts the resources of nature, working upon them so as to make them satisfy 
the human wants.  
“Production as any activity whether physical or mental, which is directed to the 
satisfaction of other people’s wants through exchange.” – Prof. J. R. Hicks 
Part 6 
Introduction 
Part 3 
Part 4 
Part 5 
Production consists of various processes to add utility to natural resources for 
gaining greater satisfaction from them by: 
1. Changing the form of natural resources. 
2. Changing the place of the resources. 
3. Making available materials at times when they are not normally available. 
4. Making use of personal skills in the form of services. 
Part 6 
Thus the entire process of production is nothing but creation of form utility, 
place utility and/or personal utility. 
Assumptions: 
a) Specified period of time. 
b) Technical knowledge does not change. 
c) Most efficient technique available. 
d) Factors of production are divisible into 
units. 
Part 2 
Part 1 
Introduction 
Part 3 
Part 4 
Part 5 
Part 6 
0
20
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1 2 3 4 5 6       7       8       9     10
© TheYoungIndianEconomists.com
Labor (in millions)
GDP (in billions)
Y= (L) f
Part 2 
Part 1 
Page 5


Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
Part 6 
Contents 
Introduction  
 
Concept of production function – Isoquants, MRTS 
 
 
Concept of Total Product, Average  & MarginalProduct   
 
 
Short Run and Long Run analysis of production 
 
The Law of Variable proportion – Returns to scale 
 
Production Cost – Concept of Cost, Classification of 
Short run cost – Longrun cost 
Introduction 
Part 1 
Part 2 
Part 3 
Part 4 
Part 5 
? Production is a very important economic activity.  
? It is important both from the individual as well as the social points of view. 
? The standard of living of a people is the ultimate analysis which depends on 
the volume and variety of production. 
? The performance of an economy is judged by the level of its production. i.e. 
Those countries which produce goods in large quantities are rich and those which 
produce little of them are poor. 
? The process of growth or development consists of increasing level of 
production in the economy. 
 The term ‘Production’ in economics refers to the creation of those goods and 
services which have exchange value. The process by which man utilises or 
converts the resources of nature, working upon them so as to make them satisfy 
the human wants.  
“Production as any activity whether physical or mental, which is directed to the 
satisfaction of other people’s wants through exchange.” – Prof. J. R. Hicks 
Part 6 
Introduction 
Part 3 
Part 4 
Part 5 
Production consists of various processes to add utility to natural resources for 
gaining greater satisfaction from them by: 
1. Changing the form of natural resources. 
2. Changing the place of the resources. 
3. Making available materials at times when they are not normally available. 
4. Making use of personal skills in the form of services. 
Part 6 
Thus the entire process of production is nothing but creation of form utility, 
place utility and/or personal utility. 
Assumptions: 
a) Specified period of time. 
b) Technical knowledge does not change. 
c) Most efficient technique available. 
d) Factors of production are divisible into 
units. 
Part 2 
Part 1 
Introduction 
Part 3 
Part 4 
Part 5 
Part 6 
0
20
40
60
80
100
120
140
160
180
200
1 2 3 4 5 6       7       8       9     10
© TheYoungIndianEconomists.com
Labor (in millions)
GDP (in billions)
Y= (L) f
Part 2 
Part 1 
Iso-quant or Equal product curves 
Part 3 
Part 4 
Part 5 
? A production function with two variable inputs can be represented by a family of 
isoproduct curves or isoquants. 
? They are also known as equal product curves or production indifference curves. 
? It is a curve along which the maximum achievable rate of production is constant. 
? It represents all possible combinations of the two factors that will give the same 
total product per unit of time. 
 
 Properties of isoquants: 
1. Slope downwards from left to the right( Negative slope) 
2. Convex to the origin 
3. Isoquants to the right represent a larger output 
4. Never cut each other 
5. Units of output shown on isoquants are purely arbitrary 
6. Between two isoquants there can be a number of isoquants 
7. No isoquants can touch either axis. 
Part 6 
Part 2 
Part 1