Economics-For Managers


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Pages : 263;Paperback;
210 X 275 mm approx.

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Economics For Managers, Management Textbook, Workbook

Microeconomics : Production Function : Chapter 4

Firms try to maximize production with the resources available at a particular period of time. They try to gain maximum benefits from the combination of their fixed and variable factors of production. The relationship that explains the combination of the variables and the output can be referred to as the production function.

There are three concepts of product - total, average and marginal product. Total product refers to the total amount of output produced using a given quantity of the factor, assuming other factors to be constant.

Average product is defined as the total product per unit of factor employed in the production process. The marginal product of an input is the extra output added by one extra unit of that input, while other inputs are held constant. The short run is a period in which variable factors such as labor and material can be changed to adjust the production but one cannot change fixed factors such as capital.

The long run is a period that is sufficient enough to change all factors of production including capital, etc. to adjust production levels. Returns to scale refers to the responsiveness of the total product when all the inputs are changed proportionately. There are three different cases of returns to scale – increasing, constant and decreasing. The optimum combination of output that a firm can produce with its given level of resources is graphically represented by an isoquant curve.

At each level of output, the various combinations of cost are represented by an isocost line. With the help of isoquants and isocosts, managers can decide upon the best combination of inputs that will enable them to produce the maximum level of output at the minimum cost.

Chapter 4 : Overview

Production Function
Concepts Of Product
The Three Stages Of Production
Short Run And Long Run

Technological Change
Returns To Scale
Production With One Variable Input
Production With Two Variable Inputs