The Production of Wheat

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Production of wheat depend upon various inputs such as Land, Labour and Capital that leads to the output. As a producer, one will calculate how much of land and labour or other factors are required to produce the given quantity of a commodity (wheat). Production function helps us study the functional relationship between physical inputs and physical output of a commodity. It is purely a technical relation which carries factor inputs and output. Y=f(X1, X2) Y: maximum possible output of a commodity X1: amount of factor-1(or input 1) X2: amount of factor-2(or input) It is equally important to note that a production function is always defined with respect to a given technical know how. Over time, technical know how may improve accordingly, It may become possible to produce 15 units of output (instead of 10) with the same physical inputs. It is a situation of shift in production function. PRODUCTION FUNCTION IN THE SHORT RUN Short run is period when some factors are fixed and some factors are variables, that means out can be increased by using more of variable factors. For instance L (labour) and K(capital), K is constant in short period, Production can only be increased by using more of L(labour) units 40x = f(5L, 4K) 45x = f(6L, 4K) i.e. Production is increased from 40 to 45 units by increasing variable L units from 5 to 6 and K units remain constant to 4. Short period production function is also called variable proportion function PRODUCTION FUNCTION IN THE LONG RUN Long period of time when all factors are variable, which means output can be increased by using more of all of production, Whereas in short run one has to maintain a factor ratio as a best factor ratio to produce a commodity. In short run the cannot be maintained as... ... middle of paper ... ... factor along with fixed factor beyond point crosses the limit of ideal factor ratio. The results in poor co-ordination between the fixed and variable factors. The law of diminishing returns accordingly sets in. RETURNS TO SCALE In the long run, all factors of production become variable, no fixed factor in long run all factors are variable. In this period of production of a commodity increased by increasing all variable factors in the same proportion. Aspects of Returns To Scale The change in output behaviour When all inputs varries in the constant proportion may show the three possibilities: (1) Increasing Returns To scale(IRS) (2) Constant Returns To Scale (CRS) (3) Diminishing Return To Scale (DRS) (1)Increasing Returns To scale(IRS) Increasing return to scale occur when given percentage increases in all factor inputs CAUSES OF INCREASING RETURN TO SCALE

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