SHORT RUN PRODUCTION

FUNCTION

SUBMITTED TO : MS.VAISHALI ECO 301 Assignment

SUBMITTED BY : KUNIKA BISHNOI ,
ENROLMENT NO. IISU/2020/ADM/27281
RIVISHA SINGH
ENROLLMENT NO. IISU/2020/ADM/31548
RIYA SHARMA
ENROLMENT NO.
CONTENTS
 Production Function
Introduction
 The concept of short run
 Short run production &
Curve
Definition & example
 Law of production
 Three stages of
production
PRODUCTION FUNCTION
I

INTRODUCTION
The production function of an enterprise is an association between inputs utilised and output manufactured
by an enterprise. For various quantities of inputs utilised, it gives the utmost quantity of output that can be
manufactured.
Production function, explains the utmost quantity of output (q) that can be manufactured by using different
combinations of these 2 factors of production Labour (L) and Capital (K).
We can write the production function as :
q = f (L,K)
whereas, L is labour and K is capital and q is the utmost output that can be manufactured.
 We use three measures of production and productivity:
 Total product (total output). In manufacturing industries such as motor vehicles, it is
straightforward to measure how much output is being produced. In service or knowledge
industries, where output is less “tangible" it is harder to measure productivity.
 Average product measures output per-worker-employed or output-per-unit of capital.
 Marginal product is the change in output from increasing the number of workers used
by one person, or by adding one more machine to the production process in the short
run.
THE CONCEPT OF SHORT RUN
It is key to understand the concept of the short run in order to understand short run costs.
In economics we distinguish between short run and long run through the application of fixed or
variable inputs.
Fixed inputs (plant, machinery, etc.) are those factors of production that cannot be changed or altered
in a short span of time because the time period is ‘too small’. This makes the short run. Here, the
inputs are of two types: fixed and variable.
In the long-run, all the inputs become variable (eg. raw materials). By this, we mean that all inputs
can be changed with a change in the volume of output. Thus, the concept of fixed inputs applies only
to the short-run.
 The cost function is a functional relationship between cost and output. It explains that the cost of production
varies with the level of output, given other things remain the same (ceteris paribus). This can be
mathematically written as: C = f(X) , where C is the cost of production and X represents the level of output.
 Total Fixed Cost - Fixed cost refers to the cost of fixed inputs. It does not change with the level of output
(thus, fixed). Fixed inputs include building, machinery etc. 
 Total Variable Cost - The cost incurred on variable factors of production is called Total Variable Cost (TVC).
These costs vary with the level of output.

Thus, the short-run cost can be expressed as :

TC = TFC + TVC
DEFINITION & EXAMPLE
The short-run production function defines the
relationship between one variable factor (keeping all
other factors fixed) and the output. The law of returns to
a factor explains such a production function.
For example, consider that a firm has 20 units of labour
and 6 acres of land and it initially uses one unit of
labour only (variable factor) on its land (fixed factor).
So, the land-labour ratio is 6:1. Now, if the firm chooses
to employ 2 units of labour, then the land-labour ratio
becomes 3:1 (6:2).
LAW OF PRODUCTION
THREE STAGES OF PRODUCTION
THANK
YOU :)