CBSE Class 12 Economics Producer Behaviour And Supply Notes

CBSE Class 6 English Practice Passages. Learning the important concepts is very important for every student to get better marks in examinations. The concepts should be clear which will help in faster learning. The attached concepts made as per NCERT and CBSE pattern will help the student to understand the chapter and score better marks in the

UNIT 3

PRODUCER BEHAVIOUR AND SUPPLY

Production: Combining inputs in order to get the output is production.

Production Function: It is the functional relationship between inputs and output in a given state of technology. Q= f(L,K) Q is the output, L: Labor, K: Capital

Fixed Factor: The factor whose quantity remains fixed with the level of output.

CONCEPTS

Time period, can be classified as:

1. Very short period or market period

2. Short period / short run

3. Long period / long run

Market period : is that period where supply / output cannot be altered or changed.

Short period /run : is that period where supply / output can be altered / changed by changing only variable factors of production. In other words fixed factors of production remain fixed.

Long period : is that period where all factors of production are changed to bring about changes in output / supply. No factor is fixed.

Variable Factor: Those inputs which change with the level of output.

Here units of capital used remain the same for all levels of output. Hence it is the fixed factor.

Amount of labor increases as output increases. Hence it is a variable factor.

PRODUCTION FUNCTION AND TIME PERIOD

1. Production function is a long period production function if all the inputs are varied.

2. Production function is a short period production function if few variable factors are combined with few fixed factors.

Concept of product :- Refers to volume of goods produced by a firm or an industry during a specific period of time.

Concepts of product:

Total Product- Total quantity of goods produced by a firm / industry during a given period of time with given number of inputs.

Average product = output per unit of variable input. APP = TPP / units of variable factorn Average product is also known as average physical product.

Marginal product (MP): refers to addition to the total product, when one more unit of variable factor is employed.

MPn = TPn – TPn-1

MPn = Marginal product of nth unit of variable factor

TPn = Total product of n units of variable factor

TPn-1= Total product of (n-1) unit of variable factor.

n=no. of units of variable factor

MP = ΔTP / Δn

We derive TP by summing up MP

TP = ΣMP

LAW OF VARIABLE PROPORTION OR RETURNS TO A VARIABLE FACTOR

Statement of law of variable proportion: In short period, when only one variable factor is increased, keeping

ther factors constant, the total product (TP) initially increases at an increasing rate, then increases at a decreasing rate and finally TP decreases. MPP initially increase then falls but remains positive then 3rd phase becomes negative.

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