Theory of Production

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THEORY OF PRODUCTION By:ABHIJEET DAS (030) SAHIB SARNA (041) NAINA TULI(024) DEEPTI CHHIKARA(053) MBA (FM) INTRODUCTION Whatever be the objective of business firms, achieving optimum efficiency in production or minimizing the cost of production is one of the prime concerns of managers today. Infact, the very survival of the firms in a competitive market depend on their ability to produce at a competitive cost. In their effort to minimize the cost of production, the fundamental questions whic
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   THEORY OFPRODUCTION By:-ABHIJEET DAS (030)SAHIB SARNA (041)NAINA TULI(024)DEEPTI CHHIKARA(053)MBA (FM)  INTRODUCTION Whatever be the objective of business firms, achievingoptimum efficiency in production or minimizing thecost of production is one of the prime concerns of managers today. Infact, the very survival of the firmsin a competitive market depend on their ability toproduce at a competitive cost .    In their effort to minimize the cost of production, the fundamentalquestions which managers are faced with, are:- How are the Production and Costs related ?Does substitution between the factors affects the Cost of Production?How does the technology i.e., factor combination matters inreducing the cost of production ?How can the least cost combination of inputs be achieved ?What happens to rate of return when more plants areadded to the firm ?What are the factors which create economies anddiseconomies for the firm ? The theory of production provide answers to these questions byproviding tools and techniques to analyze the production conditionsand to provide solution to the practical business problems.  SOME BASIC CONCEPTS Production:  Production means transforming inputs ( Labour, Machines, Raw materials etc.) into anoutput. Input and Output:    An input is a good or service that goes into the process of production. Land, Labour, Capital,Management, Entrepreneur and Technology are classified as inputs.  An output is any good or service that comes out of the production process. Fixed Inputs & Variable Inputs:    Fixed inputs remains fixed (constant) up to certain level of output.  Variable inputs change with the change in output. Short Run and Long Run :  Short run refers to a period of time in which supply of certain inputs i.e., plant, building and machinery etc. is fixed or inelastic.  Long run refers to a time period in which the supply of all the inputs is elastic or variable.
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