NAME: SASHA KUMAR

ENROLLMENT NO: 2021 086

ECONOMICS END SEMESTER
16.12.21

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1. Explain in details the short run and Long run production function with illustration?
A1. The distinction between long run and short run in microeconomics is created on the basis
of fixed inputs that impede output.
Short run- The short run is the time span in which certain inputs are changeable and others
are constant. Another trait is that new enterprises do not enter the industry, and enterprises do
not leave it.
Long run- The long run, on the other hand, is the time marked by the introduction of new
enterprises into the sector and the exit of existing firms.
Time Period and Production Functions:
The production function is differently defined in the short and long run. This difference is
crucial in microeconomics. The differentiation is determined by the characteristics of the
factor inputs.
Variable factors are inputs that vary directly with the output. These are the variables that can
be altered.  Variable factors exist both in the short and long run. Variable elements include
daily pay labour, raw materials, and so on.
Fixed factors, on the other hand, are those that cannot be adjusted or changed when the output
changes. These elements are typically associated with the short run or a short duration.
In the long term, fixed factors do not exist. As a result, we may distinguish two types of
production functions: short-run and long-run. The short-run production function defines the
link between one variable component and the output (while all other variables remain
constant). Such a production function is explained by the law of returns to a factor.
Short-run and Long-run production function
There are two types of production functions:
1. The short-run production function, as explored by the Law of Variable Proportions.
2. The long-run production function, as defined by Returns to Scale.
Law of variable proportions is the rule that asserts if all other elements are constant and one
input is modified in the short term, the total output will rise at a constant pace at first, then
decline. At some point, the marginal product will turn negative.
According to G.Stigler, “as equal increments of one input are added, the inputs of other
productive services being held constant, beyond a certain point, the resulting increments of
product will decrease, i.e., The marginal product will diminish”.

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Assumptions
The following assumptions underlie the Law of Variable Proportions:
 Only one component is changing, while the rest remain constant.
 All units of the variable factor are homogeneous.
 Physical units are used to measure the product.
 There has been no change in the state of technology.
 There is no change in the price of the product.
Total Product (TP)
It refers to the total amount of commodities generated in a certain time frame by the
combination of all inputs.
Summation of marginal products-
TP = ∑MP
Where, TP= Total Product, MP= Marginal Product
Average Product (AP)
It is calculated by dividing the total product by the total units of input utilized. To put it
another way, it relates to the output per unit of input.
AP = TP/N
Where,
AP= Average Product
TP= Total Product
N= Total units of inputs employed
Marginal Product (MP)
It is the increase or increment to the overall product that occurs when one additional unit of
the variable input is used. In other words, it is the ratio of the change in total product to the
change in input units. It is written as
MP= ∆TP/∆ N
Where,
MP = Marginal Product
ΔTP = Change in total product
ΔN = Change in units of input It

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Is also expressed as
MP = TP (n) – TP (n-1)
Where,
MP = Marginal Product
TP(n) = Total product of employing nth unit of a factor
TP(n-1) = Total product of employing the previous unit of a factor, that is,
(n-1)th unit of a factor.

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