Full Name: Course/Year:

MODULE 5 – ECON 221

THEORY OF PRODUCTION

In modules 2, 3 and 4, the discussion was focused on the consumers on how they
allocate the income, decides on consumption among the many available goods and
services. In this module, our focus will be on the equally important agent in our
economy, the firm. A firm is an entity that purchases and employs resources or
factors of production to produce or create goods and provide services. Let us
remember that, before we eat our meal, some have to produce rice, vegetables,
meat, canned goods, noodles, etc. We will explore this concept of production.

Learning Outcomes: at the end of module 5, you will be able to:

1. evaluate the process of production;
2. describe In
thethis module, we
distinctions are going
between to and
fixed discuss the different
variable factors that influence behavior,
inputs among
total, average and
utility, marginal products;
indifference curve, andand
budget line.
3. develop a product which applies the concept of production function
process with proper labeling of inputs.

Learning Activity 5.1: ELICIT AND ENGAGE

Describe how a product is being produced. Cite a specific (any) product to illustrate your answer. Be
specific.

Learning Activity 5.2: EXPLAIN

Watch the pre-recorded video on the discussion of the topic. Please take note of some concepts for
application.

Learning Activity 5.3: ELABORATE

Personal Application of the Production Function Concept.
Write the details of your average daily activities (24 hours) from the morning until you sleep
in the evening and wake up the following day. In this activity, you will assess and realize how
productive or unproductive you are every day. You can write your answer in the vacant space.
 MODULE 5 – Theory of Production 2

Example:
Time Duration Activities

5:30 – 5:45 15 mins Fix my bed, personal hygiene activities

5:45 – 5:55 10 mins Exercise
5:55 – 7:00 1 hour and 5 minutes Prepare our breakfast while making sure that the
kitchen is clean

OR OR OR
6: 00 Cannot be Wake up
determined Check my cellphone, open Facebook and Messenger
Play ML
Around 10:00 AM Eat the food prepared by somebody

You can do your own style. Be creative in your presentation as long it is the reality. Just be honest.

Learning Activity 5.4: EVALUATE

Complete the table but show your solutions. After which, graph the total product, marginal product
and average product and identify the stages of production. When does the principle of diminishing
marginal product set in? Write your solution and graph on a vacant space in the module.

Input Total Marginal Average

(Labor) Product (TP) Product (MP) Product (AP)
1 8
2 20
3 36
4 48
5 55
6 60
7 60
8 56

Learning Activity 5.5: EXTEND

You are tasked to develop a product (anything that undergoes the process of production). Take a 3-
5 minutes video from the combination of inputs, production process up to the output/finished
product. Be sure every input (fixed and variable) is appropriately labeled/identified, and the product
has a name. This activity can be done individually, with a pair or group of not more than four
members (you can choose your groupmates). Submit the video using your OTG or flash drive.

Southern Christian College Econ 221 – Basic Microeconomics

 MODULE 5 – Theory of Production 3

Big Ideas…
- The firm is an economic agent that purchases and employs resources to produce goods
and services.
- Production is any economic activity, which combines the four factors of production like
land, labor, capital, and entrepreneurship to form an output that will give direct
satisfaction to consumers.
- The physical relationship between the inputs and output of a firm at a given period of time
is called the production function.
- Total product refers to the total output produced by a firm. A marginal product is an extra
output that is associated when one more unit of the variable input is used. Average
product refers to the contribution of each unit of input used.
- The principle of diminishing marginal product states that as the use of one input increases,
the additional product that can be attributed to each additional unit of the variable input
will decline.
- If the average product is increasing, it is below the marginal product. When the average
product is decreasing, it is above the marginal product.

_______________________________________________________________________________________________________________

Freedom space…
Feel free to write here your evaluation, suggestion/s on how we can improve your learning.

John 3:16
“For God so loved the world, that he gave his only Son, that whoever believes
in him should not perish but have eternal life.”

Southern Christian College Econ 221 – Basic Microeconomics