The Cobb Douglas production function is named after American economists Charles Cobb and Paul Douglas. They introduced this production function in 1928 in a paper published in the American Economic…
The production of all goods and services is carried out using certain inputs. These inputs include the labour, capital and raw materials used in producing the given good or service.…
To illustrate simultaneous equilibrium, we will consider a 2*2*2 model with two products (X and Y), two consumers (A and B) and two factors of production (L and K). The production…
We already discussed the Production Possibility Curve associated with two outputs and the Economies of Scope. Here, we will analyze how a multi-product firm can achieve equilibrium. It can help…
The Production Possibility Curve is also referred to as the product transformation curve and production possibility frontier. Firms often produce more than one outputs that are closely related to each…
The expansion of output can be accompanied by increasing, constant or decreasing returns to scale. These can also correspond to Economies of scale. As discussed in production theory, returns to…
In the long run, firms have a lot more flexibility in the choice of inputs. In addition to labour, firms can choose to expand their capital by setting up new…
In the production theory, we discussed how inputs are used to generate output in the short run and the long run. We also analyzed the effects of changing technology on…
All factors of production are variable in the long run. Moreover, technology does not remain constant in the long run. Research, development and technical progress in production can have a…
In the short run, capital is a fixed factor of production and only labour can be varied by firms to change output. The Law of Variable Proportions holds in the…
Production can be defined as the process by which inputs are used to make outputs. Inputs, also known as factors of production, include resources such as labour, capital and raw…
