Input (x)

350 300 250 200 150 100 50 0

0
500
1000
1500
2000
Groundnut yield (y)

2500
3000
3472.5 3500
4000
mal financial input level is the profit maximizing level of the input (MVP=MIC)
RENCE:
It is to be noted that MVP and MIC values in the table are used to determine the
al financial input level.
At the second financial input level. MVP and MIC are exactly equal. At this point the
onal
e and the additional financial input are equal in their values.
Therefore, the profit maximizing financial input
is at the point where MVP = MIC
Py=Rs.25
Px=Rs8.20
423.47 0
5 0.016 40 147.61 0.08
5 0.06 35 147.53 0.3
5 0.026 30 147.23 0.13
5 0.322 25 147.1 1.61
5 0.218 20 145.49 1.09
5 0.536 15 144.4 2.68
5 0.202 10 141.72 1.01
NIL 5 140.71 NIL NIL
MPP=∆TPP/∆X Groundnut yield kgs.(Y) TPP ∆TPP (∆Y) ∆X Level of financial input (X)
500

0
0 50 100 150 200 250 300 350

Input (x)
 TVP=TPP x Py ∆TVP MVP=∆TVP/∆Y TIC= Levels of finance x Px ∆TIC
3517.75 NIL NIL 41 NIL
3543 25.25 25 82 41
3610 67 25 123 41
3637.25 27.25 25 164 41
3677.5 40.25 25 205 41
3680.75 3.25 25 246 41
3688.25 7.5 25 287 41
3690.25 2 25 328 41

x y MVC
0 138.9 3472.5
423.47 0 0
level is at the point where MVP
Therefore, the profit ma
income and the additional finan
additional
At the second financial i
optimal financial input level.
It is to be noted that MV
INFERENCE:
Optimal financial input level is t

Input - Output plot

MPP
MVC
MIC

0
300 350 400 450
 0
300 350 400 450
MIC=∆TIC/∆X MVC
NIL 3472.5
8.2 NIL
8.2 NIL
8.2 NIL
8.2 NIL
8.2 NIL
8.2 NIL
8.2 NIL
8.2 0
Level Product combination
Tomato yield Capsicum yield
Y1 ∆Y1 Y2 ∆Y2
1 25 NIL 72 NIL
2 50 25 68 4
3 75 25 62 6
4 100 25 53 9
5 125 25 42 11
6 150 25 28 14
7 175 25 10 18

INFERENCE:
As it could be seen from the given data, there are 7 levels of output combi
is also seen that Tomato yield (Y1) is added and Capsicum yield is sacrificed (Y2).
obtaining optimal combination, it is necessary to determine the additional yield
(ΔY1) or the additional yield that is cost lost (ΔY2).

In the tomato-capsicum enterprise combination with an investment of Rs.25000

optimal enterprise combination is attained at the 3rd level of enterprise combin

This is where the income will be maximum for the farmer.

The substitution process needs to be stopped beyond this level as any combinati
will result in lesser income.
Any combination above the optimal level is supra-optimal and substitution shou
be continued as there is scope for more profit
 Py1=Rs.14.75
Py2=Rs.60.50

MRS of Y1 for Y2 Price ratio (PY1/PY2)

(MRSY1Y2)

NIL NIL
0.16 0.2438
0.24 0.2438
0.36 0.2438
0.44 0.2438
0.56 0.2438
0.72 0.2438

ere are 7 levels of output combinations. It

Capsicum yield is sacrificed (Y2). Before
o determine the additional yield that is gained
2).

with an investment of Rs.2500000, The

e 3rd level of enterprise combination.

he farmer.
eyond this level as any combination after the optimal level

a-optimal and substitution should

Amount of capital used (in Rs.) Added returns (in Rs.) Added returns (in Rs.)
Crop Dairy
First (10000) 20000 19000
Second (10000) 19000 18000
Third (10000) 15000 15000
Fourth (10000) 12000 11000
Fifth (10000) 10000 9000
Total returns from Rs. 76000 72000
Net Profit 26000 22000

From the above table it is found that the investment of Rs.50000 yield maxim
average returns from poultry enterprise. But if a farmer is investing his amou
keeping in view the marginal (added) returns, the profit he can earn is indica
which is as follows

Additional (marginal) returns of the amount inve

Year Amount Enterprise

First 10000 Poultry
Second 10000 Crop
Third 10000 Crop
Fourth 10000 Dairy
Fifth 10000 Poultry
Total 50000
Net profit 98000-50000

The limited availability of financial input must be allocated among the three enterprise
the following manner using VMPs. First and fifth units should be allocated to Poultry an
and fourth unit to dairy.
This enterprise combination can alone lead to maximum
income (Rs.98000) such as Total income = Rs.98000

The optimum allocation of resources for maximum utilization is as follows

Stage Investment Enterprise

First Rs.20000 Poultry
Second Rs.20000 Crop
Third Rs.10000 Dairy
Total Rs.50000
Net Profit Marginal returns-Investment

INFERENCE:
Thus, the total marginal returns and net profit of Rs.98000 and Rs.48000 respectively
are greater than the average returns and net profit
the most profitable single enterprise i.e. Poultry. Henceforth, for maximization of returns
resource allocation should be done in view of marginal (added) returns rather than that of
average returns.
It is observed from the above table that cultivator is getting total net profit of
INFERENCE:
Thus, the total marginal returns and net profit of Rs.98000 and Rs.48000 respectively
are greater than the average returns and net profit
the most profitable single enterprise i.e. Poultry. Henceforth, for maximization of returns
resource allocation should be done in view of marginal (added) returns rather than that of
average returns.
It is observed from the above table that cultivator is getting total net profit of
Rs.48000 which is more than the profit from any single enterprise. Any other allocation of the la
amount of money shall give lesser returns.
 Added returns (in Rs.)
Poultry
21000
19000
15000
12000
11000
78000
28000

nd that the investment of Rs.50000 yield maximum

enterprise. But if a farmer is investing his amount of Rs.50000
(added) returns, the profit he can earn is indicated in Table

dditional (marginal) returns of the amount invested

Marginal return (Rs.)

21000
20000
19000
19000
19000
98000
Rs.48000

t must be allocated among the three enterprises in

and fifth units should be allocated to Poultry and second and third unit to crop

lead to maximum
e = Rs.98000

or maximum utilization is as follows

Benefit Marginal returns (Rs.)

Added returns 40000
Added returns 39000
Added returns 19000
98000
48000

Rs.98000 and Rs.48000 respectively

fit
Henceforth, for maximization of returns
arginal (added) returns rather than that of

or is getting total net profit of

 Rs.98000 and Rs.48000 respectively
fit
Henceforth, for maximization of returns
arginal (added) returns rather than that of

or is getting total net profit of

single enterprise. Any other allocation of the last