PRODUCTION ANALYSIS

SCOPE

PRODUCTION POSSIBILITY ANALYSIS.

LAW OF VARIABLE PROPORTION.

LAW OF RETURN TO SCALE.

ISOQUANT - ISOCOST ANALYSIS.

PRODUCTION ANALYSIS
INPUT OUTPUT
PRODUCTION
DEFENCE SERVICES PRODUCERS – THEY SATISFY NEEDS OF NATIONAL SECURITY

PRODUCTION: CONVERSION OR TRANSFORMATION
OF INPUTS TO OUTPUT. PROCESS ADDS VALUE TO INPUTS TO SATISFY NEEDS/ WANTS. PRODUCTION: ADDITION OF VALUE/ UTILITY.

PRODUCTION ANALYSIS
INPUT OUTPUT
PRODUCTION

PRODUCTION ANALYSIS

PRODUCTION ANALYSIS: LAWS GOVERNING
RELATIONSHIP BETWEEN INPUTS & OUTPUTS. LAWS HELP DECIDE OPTIMAL COMBINATION OF INPUTS (RESOURCES) FOR DESIRED RESULTS AT LOWEST COST.
DEFENCE SERVICES

. LAW OF RETURN TO SCALE.  ANALYSIS TECHNIQUES   PRODUCTION POSSIBILITY ANALYSIS.PRODUCTION ANALYSIS  LAWS   LAW OF VARIABLE PROPORTIONS. ISO-COST / ISO-QUANT ANALYSIS.

PRODUCTION ANALYSIS INPUT OUTPUT PRODUCTION PRODUCTION ANALYSIS PRODUCTION ANALYSIS: LAWS GOVERNING RELATIONSHIP BETWEEN INPUTS & OUTPUTS. . LAWS HELP DECIDE OPTIMAL COMBINATION OF INPUTS (RESOURCES) FOR DESIRED RESULTS AT LOWEST COST.

PRODUCTION FUNCTION SUBSTITUTION OF RESOURCE  WITHIN ONE INPUT ITSELF: INCREASE/ DECREASE ONE INPUT BY ANOTHER.  PRODUCTION FUNCTION • RELATIONSHIP •BETWEEN MECHANISED INFANTRY Vs INPUTS AND OUTPUTS • AD AIRCRAFT Vs MISSILES • GUNS Vs GROUND STRIKE AIRCRAFT • P = f (R1.R2…Rn) .

MARGINAL & AVERAGE OUTPUTS WILL INCREASE THEN AFTER A POINT. . FIRST MARGINAL AND THEN AVERAGE OUTPUT WILL DIMINISH”.  APPLICABLE IN SHORT RUN.LAW OF VARIABLE PROPORTIONS  HOW TOTAL & MARGINAL OUTPUT IS AFFECTED BY CHANGE IN ONE INPUT KEEPING OTHER INPUTS CONSTATNT.  “AS PROPORTION OF ONE FACTOR IN A COMBINATION OF FACTORS IS INCREASED.

LAW OF VARIABLE PROPORTIONS  EFFECT ON OUTPUT: THREE STAGES  INCREASING RETURNS – MARGINAL RETURN RISES  CONSTANT RETURNS – MARGINAL RETURN FALLS DIMINISHING RETURNS – MARGINAL RETURN BECOMES NEGATIVE  .

LAW OF VARIABLE PROPORTIONS PRODUCTION OF AMN SHELLS PER MACHINE PER HOUR IN ORD FACTORY NO OF WORKERS TOTAL PRODUCTION AVERAGE PRODUCTION MARGINAL PRODUCTION STAGES OF PRODUCTION 1 2 3 4 5 8 20 36 48 55 8 10 12 12 11 8 12 16 12 8 6 7 60 60 10 8.6 5 0 8 56 7 -4 .

6 5 0 II III 8 56 7 -4 III .LAW OF VARIABLE PROPORTIONS PRODUCTION OF AMN SHELLS PER MACHINE PER HOUR IN ORD FACTORY NO OF WORKERS TOTAL PRODUCTION AVERAGE PRODUCTION MARGINAL PRODUCTION STAGES OF PRODUCTION 1 2 3 4 5 8 20 36 48 55 8 10 12 12 11 8 12 16 12 8 I I I II II 6 7 60 60 10 8.

LAW OF VARIABLE PROPORTIONS DIMNISHING RETURN: INCREASE IN OUTPUT CONSTANT INCREASE IN OUTPUT MORE INCREASING RETURN:RETRUN: INCREASE IN OUTPUT LESS THAN PROPORTIONATE TO IN INPUT PROPORTIONATE TO INCREASE IN INPUT THAN PROPORTIONATE TO INCREASEINCREASE IN INPUT 1 2 OPTIMAL POINT IN EMPLOYMENT TP OF FACTOR STAGE I II A MP > AP III MP/AP B AP > MP AP LABOUR MP .

   . IN SITUATIONS WHERE ONE FACTOR IS INCREASED. AMOUNT OF TIME ALLOCATED TO TRAINING AND STANDARDS ACHIEVED.  NO OF GUNS ALLOTTED TO NEUTRALISE A TARGET AND EFFECT ACHIEVED. WHILE OTHERS REMAIN CONSTANT.EXAMPLES OF LAW OF VARIABLE PROPORTIONS  NO OF AIRCRAFT TAKING PART IN BOMBING MISSION AND DESTRUCTION SOUGHT. NO OF MEN ALLOCATED TO A TASK AND OUTPUT. IN SHORT.

REST CONSTANT.  ONLY ONE FACTOR VARIABLE.LAW OF VARIABLE PROPORTIONS ASSUMPTIONS  NO CHANGE IN TECHNOLOGY IMPROVEMENT IN TECHNOLOGY BOUND TO RAISE OUTPUT. .

DOUBLE. WHEN ALL INPUTS CHANGE SIMULTANEOUSLY IN SAME RATIO . TREBLE ETC…  LARGER THE SCALE OF ACTIVITIES – LOWER GENERALLY THE COST OF ACHIEVING OUTPUT.  ECONOMIES OF SCALE ARISE FROM LARGE SCALE ACTIVITIES.LAW OF RETURN TO SCALE  DEALS WITH EFFECT ON OUTPUT. .

LAW OF RETURN TO SCALE  ECONOMIES RESULT FROM  EFFICIENT USE OF RESOURCES  FULLER UTILISATION OF EXISITING CAPACITY R&D  .

LAW OF RETURN TO SCALE  ECONOMIES OF SCALE  TRUE ONLY UP TO A POINT. INCREASING RETURNS – MARGINAL RETURN RISES CONSTANT RETURNS – MARGINAL RETURN THREE STAGES   CONSTANT  DIMINISHING RETURNS – MARGINAL RETURN DIMNISHES .   THEN DIS-ECONOMIES SETS IN.

RETURNS TO SCALE (PRODUCTION OF AMN SHELLS IN ORD FACTORY PER MACHINE) FACTORS OF PRODN EMP TOTAL PRODUCTS /RETURNS MARGINAL PRODUCT/ RETURNS STAGE OF RETURN TO SCALE .

RETURNS TO SCALE (PRODUCTION OF AMN SHELLS IN ORD FACTORY PER MACHINE) FACTORS OF PRODN EMP 1 WORKER+3 hrs TOTAL PRODUCTS /RETURNS MARGINAL PRODUCT/ RETURNS STAGE OF RETURN TO SCALE .

RETURNS TO SCALE (PRODUCTION OF AMN SHELLS IN ORD FACTORY PER MACHINE) FACTORS OF PRODN EMP 1 WORKER+3 hrs 2 WORKERS + 6 hrs TOTAL PRODUCTS /RETURNS MARGINAL PRODUCT/ RETURNS STAGE OF RETURN TO SCALE .

RETURNS TO SCALE (PRODUCTION OF AMN SHELLS IN ORD FACTORY PER MACHINE) FACTORS OF PRODN EMP 1 WORKER+3 hrs 2 WORKERS + 6 hrs 3 WORKERS + 9hrs TOTAL PRODUCTS /RETURNS MARGINAL PRODUCT/ RETURNS STAGE OF RETURN TO SCALE 4 WORKERS+ 12 hrs 5 WORKERS +15 hrs 6 WORKERS + 18 hrs. 7 WORKERS + 21 hrs 8 WORKERS + 24 hrs 9 WORKERS + 27 hrs .

1400 1900 2400 7 WORKERS + 21 hrs 8 WORKERS + 24 hrs 9 WORKERS + 27 hrs 2800 3100 3200 .RETURNS TO SCALE (PRODUCTION OF AMN SHELLS IN ORD FACTORY PER MACHINE) FACTORS OF PRODN EMP 1 WORKER+3 hrs 2 WORKERS + 6 hrs 3 WORKERS + 9hrs TOTAL PRODUCTS /RETURNS MARGINAL PRODUCT/ RETURNS STAGE OF RETURN TO SCALE 200 500 900 4 WORKERS+ 12 hrs 5 WORKERS +15 hrs 6 WORKERS + 18 hrs.

RETURNS TO SCALE (PRODUCTION OF AMN SHELLS IN ORD FACTORY PER MACHINE) FACTORS OF PRODN EMP 1 WORKER+3 hrs 2 WORKERS + 6 hrs 3 WORKERS + 9hrs TOTAL PRODUCTS /RETURNS MARGINAL PRODUCT/ RETURNS STAGE OF RETURN TO SCALE 200 500 900 200 300 400 4 WORKERS+ 12 hrs 5 WORKERS +15 hrs 6 WORKERS + 18 hrs. 1400 1900 2400 500 500 500 7 WORKERS + 21 hrs 8 WORKERS + 24 hrs 9 WORKERS + 27 hrs 2800 3100 3200 400 300 100 .

RETURNS TO SCALE (PRODUCTION OF AMN SHELLS IN ORD FACTORY PER MACHINE) FACTORS OF PRODN EMP 1 WORKER+3 hrs 2 WORKERS + 6 hrs 3 WORKERS + 9hrs 4 WORKERS+ 12 hrs 5 WORKERS +15 hrs 6 WORKERS + 18 hrs. 7 WORKERS + 21 hrs TOTAL PRODUCTS /RETURNS MARGINAL PRODUCT/ RETURNS STAGE OF RETURN TO SCALE 200 500 900 1400 1900 2400 2800 200 300 400 500 500 500 400 STAGE OF INCREASING RETURNS STAGE OF CONSTANT RETURNS STAGE OF DECREASING RETURNS 8 WORKERS + 24 hrs 9 WORKERS + 27 hrs 3100 3200 300 100 .

LAW OF RETURN TO SCALE OPTIMAL POINT IN EMPLOYMENT OF FACTORS 6 5 MARGINAL 4 OUTPUT 3 2 STAGE 2 STAGE 1 STAGE 3 MARGINAL PRODUCT CURVE 1 0 1 2 3 4 5 6 7 8 9 10 11 NO OF COMPOSITE UNITS OF FACTORS OF PRODUCTION .

 OPTIMUM MIX OF INPUTS TO ACHIEVE THE RESULT VARIES WITH THE DEGREE OF RESULT DESIRED.LAW OF RETURN TO SCALE  DIS-ECONOMIES START OPERATING AS SCALE OF ACTIVITY IS RAISED BEYOND A POINT. . CDR MUST ANALYSE THAT MARGINAL RETURN IN TERMS OF RESULT NOT LESS THAN MARGINAL INCREASE IN INPUT.   APPLICABLE IN LONG RUN.

.PRODUCTION POSSIBILITY ANALYSIS • DETERMINES MAX RESULT POSSIBLE WITHIN GIVEN RESOURCE ALLOCATION. • ANALYSIS OF ONE INPUT – TWO OUTPUT CASE. • TECHNIQUE MAKES USE OF PRODUCTION POSSIBILITY CURVE. • DETERMINES MOST EFFICIENT COMBINATION OF TWO FOR MAXIMISING RESULTS WITHIN GIVEN ONE INPUT.

• C CRORE – 400 OP OR 930 DP POSSIBLE. • DEFENCE PLANNER FORMULATES PRODUCTION POSSIBILITY SCHEDULE.PRODUCTION POSSIBILITY ANALYSIS EXAMPLE • ALLOCATED BUDGET – C CRORES. . • ACQUISITION OF OPTIMUM COMBINATION OF OFFENSIVE POTENTIAL (OP) AND DEFENSIVE POTENTIAL (DP).

DEFENCE RESOURCES OUTPUT -OP&DP) COMBINATIONS POSSIBLE POSSIBLE COMBINATIONS OFFENSIVE POTENTIAL DEFENSIVE POTENTIAL A B C D E 400 0 0 940 .PRODUCTION POSSIBILITY SCHEDULE (INPUT.

DEFENCE RESOURCES OUTPUT -OP&DP) COMBINATIONS POSSIBLE POSSIBLE COMBINATIONS OFFENSIVE POTENTIAL DEFENSIVE POTENTIAL REAL SITUATION PRODUCTION POSSIBILITY A 400 0 B 300 SCHEDULE CAN BE FORMULATED BASED 520COST ON C 200 730 BENEFIT ANALYSIS. SYSTEM ANALYSIS AND OR D E 100 0 870 940 .PRODUCTION POSSIBILITY SCHEDULE (INPUT.

PRODUCTION POSSIBILITY CURVE PP CURVE FOR BUDGET C + X CRORES 500 400 300 200 100 0 I1 E2 E1 COMBINATIONS ON PP CURVE ARE THE UTMOST THAT BUDGET CAN FETCH NON FEASIBLE COMBINATION OFFENSIVE POTENTIAL COMBINATIONS I 1 & I 2 NOT GETTING BEST EFFICIENCY I2 E3 OUT OF BUDGET 0 200 DEFENSIVE POTENTIAL 400 600 800 1000 1200 .

PRODUCTION POSSIBILITY CURVE CONCAVE NATURE OF PP CURVE 500 E1 400 300 200 100 0 E2 MARGINAL RATE OF TRANSFORMATION: (MRT) AMOUNT OF ONE OBJECT GIVEN TO ACHIEVE EXTRA AMOUNT OF OTHER E3 MRT: INCREASES PROGRESSIVELY BECAUSE RESOURCES LESS AND LESS ADAPTABLE TO OTHER E4 OBJECT IS DIVERTED. OFFENSIVE POTENTIAL 0 200 DEFENSIVE POTENTIAL 400 600 800 1000 1200 .

PRODUCTION POSSIBILITY CURVE 500 E1 400 300 200 100 0 E2 E3 ALL COMBINATIONS ON PP CURVE EFFICIENT: WHICH TO CHOOSE? OFFENSIVE POTENTIAL E4 0 200 DEFENSIVE POTENTIAL 400 600 800 1000 1200 .

OFFENSIVE POTENTIAL C D IC1 0 200 400 600 800 1000 1200 DEFENSIVE POTENTIAL . B DECISION MAKER INDIFFERENT TO CHOICES BETWEEN COMBINATIONS.INDIFFERENCE CURVE A 500 400 300 200 100 0 ALL POINTS YIELD EQUAL LEVEL OF MILITARY UTILITY OR EFFECTIVENESS.

INDIFFERENCE MAP EACH CURVE REPRESENTS 500 400 300 200 100 0 IC 1 IC 2 IC 3 DIFFERENT LEVEL OF EFFECTIVENESS. OFFENSIVE POTENTIAL 0 200 DEFENSIVE POTENTIAL 400 600 800 1000 1200 .

PRODUCTION POSSIBILITY CURVE WITH INDIFFERENCE MAP SUPERIMPOSED 500 400 300 200 100 0 IC 1 E1 IC 2 IC 3 N E2 I-INEFFICIENT E.POSSIBLE & OPTIMUM N-NON FEASIBLE OFFENSIVE POTENTIAL I E E3 I I 0 200 E4 E5 N DEFENSIVE POTENTIAL 400 600 800 1000 1200 .

E5 DEFENSIVE POTENTIAL 400 600 800 1000 1200 . INDIFFERENCE CURVE SHOWS ALL COMBINATIONS OFFENSIVE POTENTIAL 300 200 100 0 I E E3 HAVING EQUAL LEVEL OF MILITARY UTILITY E4 I I 0 200 (EFFECTIVENESS) .PRODUCTION POSSIBILITY CURVE WITH INDIFFERENCE MAP SUPERIMPOSED PP CURVE SHOWS ALL COMBINATIONS UTMOST 500 400 IC 1 E1 IC 2 IC 3 E2 THAT BUDGET CAN FETCH (EFFICIENCY) .

INDIFFERNCE CURVE ANALYSIS NATIONAL SECURITY VS DEVP 20 RATE 10 OF ECO DEVP 0 POLICY FEASIBLE AREA POLICY FEASIBILITY CURVE BASED ON GDP 0 10 20 30 40 50 60 70 80 90 (TOTAL RESOURCES) LEVEL OF SECURITY % .

INDIFFERENCE CURVE DEFENCE EXP VS DEVP INDIFFERENCE CURVES SHOWING THE DEGREE TO WHICH NATIONAL INTERESTS ARE MET IC5 IC3 IC2 IC 4 20 RATE 10 OF ECO DEVP 0 IC1 0 10 20 30 40 50 60 70 80 90 LEVEL OF SECURITY % .

PRODUCTION POSSIBILITY CURVE WITH INDIFFERENCE CURVE SUPERIMPOSED DEFENCE EXP VS DEVP E 20 D C A IC2 IC3 INDIFFERENCE CURVES SHOWING THE DEGREE TO WHICH NATIONAL INTERESTS ARE MET IC5 IC 4 POLICY FEASIBILITY CURVE BASED ON GDP (TOTAL RESOURCES) RATE 10 OF ECO DEVP 0 POLICY FEASIBLE AREA IC1 B 0 10 20 30 40 50 60 70 80 90 LEVEL OF SECURITY % .

ALL SITUATIONS WHERE ONE RESOURCE CAN BE USED FOR TWO PURPOSES .PRODUCTION POSSIBILITY CURVE APPLICATIONS  A SQN OF TPT AIRCRAFT LIFTING MEN AND MATERIAL.  AN ENGINEER COY CLEARING MINES AND CONSTRUCTING DEFENCES.   A SET OF MACHINES PRODUCING TWO PRODUCTS. FORCES USED NOW AND HELD IN RESERVE.

ISOQUANT CURVE 100 80 60 TWO COMBINATION OF INPUTS GIVING SAME OUTPUT MORE BOMBERS WITH SINGLE BOMBS BOMBERS WITH TWO BOMBS LESSER NO OF BOMBERS FLYING MORE SORTIES 20 10 TARGETS DESTRUCTION 0 0 20 40 60 80 100 BOMBERS 40 BOMBS .

ISOQUANT CURVES 100 80 60 IT IS POSSIBLE TO MOVE DIFFERENT ISOQUANT FOR TO HIGHER LEVEL OF DIFFERENT OUTPUTS OUTPUT BY INCREASING ATLEAST ONE INPUT. BOMBERS 40 20 0 0 20 40 50 TARGETS 40 TARGETS 30 TARGETS 20 TARGETS 10 TARGETS 60 80 100 BOMBS .

ISOCOST LINE OR EXCHANGE CURVE OR EQUAL COST LINE OR BUDGET LINE 100 VARIOUS COMBINATIONS OF 80 60 BOMBERS AND BOMBS THAT CAN BE PROCURED IN GIVEN BUDGET BOMBERS X 40 20 0 0 20 40 Y 60 BOMBS 80 100 Y1 .

50 TARGETS 40 TARGETS 30 TARGETS 20 TARGETS 10 TARGETS BOMBERS 40 20 0 E1 E 0 20 40 D BOMBS 60 80 100 B .ISOQUANT & ISOCOSTCURVES 100 80 60 ISOCOST shows exchange/ subs between items keeping budget constant (ECONOMY). ISOQUANT shows exchange/ subs between items keeping output A constant (EFFECTIVENESS).

REDUCTION IN EFFECTIVENESS DUE TO BUDGET CUT OR INCREASE IN PRICE. EFFECTIVENESS IN A GIVEN BUDGET. COMBINATION FOR A GIVEN BUDGET AND EFFECTIVENESS.     .ISOQUANT AND ISOCOST ANALYSIS APPLICATIONS  SITUATIONS WHERE TWO PARTIALLY SUBSTITUTABLE FACTORS PRODUCE SAME OUTPUT. BUDGET INCREASE REQUIRED FOR ENHANCING EFECTIVENESS.

Sign up to vote on this title
UsefulNot useful