Definition: The Cobb-Douglas Production Function, given by Charles W. Cobb and Paul H. Douglas is a linear homogeneous production function, which implies, that the factors of production can be substituted for one another up to a certain extent only. The Cobb-Douglas Production Function can be expressed as follows: Q = A Lα Kβ Where, Q … Read more
In the third stage of Returns to Scale, the proportionate increase in the total output is less than the proportionate increase in inputs.
In the second stage of Returns to Scale, the proportionate increase in the total output is equal to the proportionate increase in inputs.
In the first stage of Returns to Scale, the proportionate increase in total output is more than the proportionate increase in inputs
MeaningThe law of returns to a scale explains the proportional change in output with respect to proportional change in inputs. Definition“The term returns to scale or changes in scale refers to the changes in output as all factors change by the same proportion.” Koutsoyiannis
Law of diminishing marginal product refers to a situation in which total output increases at a diminishing rate when more of the variable factor is combined with the fixed factor(s) of production. In such a situation, marginal product of the variable factor must be diminishing.
Marginal product is the addition to Total Product when an extra factor input is used.Marginal Product = Change in Output/ Change in Input∆TP/∆Q
Average product is explained as the output per unit of the variable input. We can calculate it as follows:AP= TP/Q
It refers to the total amount of outputproduced by a firm using given inputs in a given period of time.Total Product Formula is:-AP× Q Total Product is the summation of Marginal products at different input levels.Total Product = Ʃ Marginal ProductAlso known as a total return or total physical product
The function that explains the relationship between physical inputs and physical output (final output) is called the production function.We normally denote the production function in the form:Q = f(X1, X2)where Q represents the final output and X1 and X2 are inputs or factors of production.
Production is a process of transformation of inputs into output.