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Production and Capital Formation Insights

The document summarizes key concepts in production theory including: 1. It defines the four main factors of production - land, labor, capital and entrepreneurship and describes their key characteristics. 2. It explains capital formation as the process of increasing the stock of capital goods through savings, investment, and entrepreneurship. 3. It outlines the objectives and problems faced by enterprises in achieving objectives like survival, growth, profitability while dealing with constraints like scarce resources, infrastructure issues, and economic conditions.

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hoolsfoun
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32 views4 pages

Production and Capital Formation Insights

The document summarizes key concepts in production theory including: 1. It defines the four main factors of production - land, labor, capital and entrepreneurship and describes their key characteristics. 2. It explains capital formation as the process of increasing the stock of capital goods through savings, investment, and entrepreneurship. 3. It outlines the objectives and problems faced by enterprises in achieving objectives like survival, growth, profitability while dealing with constraints like scarce resources, infrastructure issues, and economic conditions.

Uploaded by

hoolsfoun
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

PRODUCTION FUNCTION (THEORY)

Production Creation Utility Addition of Value


of

Production Creation of Utility Form Utility

utility JAM L

Place

Time All

Utility

Personal Utility

LAND

All Free Nature


gift of


PerfectlyInelastic Economy

Fixed in Quantity Relatively Elastic Indio

Permanent

Lack's Mobility

specificfactor of production

Varies in fertility

LABOUR

Mental

or Physical Exertion EconomicReward

Human Efforts

Perishable Nature

Weak Bargaining Power

self source

Variations

Productivity

Relation Between Labour Supply Wage Rate


le Between Labour up ly k g l he

Direct Relation

Reverse Relationship at Higher Prices

Reverse Relationship at Lower Prices

CAPITAL

Part of wealth used for further production of


wealth or which yield's an income

Stock Concept

Produced Mean's Manmade mean's of production

Mobility

Perishable

Types of Capital

v v v v

Fixed Real Tangible Individual

v v v v

Circulating Human Intangible Social

CAPITAL FORMATION

Increase in stock real capital Capital Goods

of

Replacement Renovation Additional Productive Capacity

Creation of Mobilisation of Investment


ofsaving's


SavingsEhud Savings into Real Capital

Voluntary

f Compulsory
1 I

Individual
1
Household

1 Banks 1 Entrepreneur's

2 Business


2 Financial Institution 2 Positive Eco Env

Government 3 Capital Market 3 Inducement to Trust


ENTREPRENEUR

Organiser Manager Risk Taker

Catalyst

Final Responsibility

Initiate Risk Bearing Innovations

ENTERPRISE's OBJECTIVES

v v

ORGANIC SOCIAL NATIONAL

Survival

Growth Expansion

ECONOMIC HUMAN

Profit

ENTERPRISE's PROBLEMS

v v v

Objectives

Physical Organisation Legal

Facilities v structure Compliance

Location Finance Marketing Industrial

Size of Relation

Plant

CONSTRAINTS IN ACHIEVING OBJECTIVES

v v

Information Factor's
of others

Production

Infrastructure Economic

Aspects

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