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Home Production Function Long Run Production With Variable Inputs


Long Run Production With Variable Inputs:


The long run is the lengthy period of time during with all inputs can be varied. There are no fixed output in the long run. All factors of production are variable inputs.


We now analyze production function by allowing two factors say labor and capital to very while all others are held constant. With both factors are variable, a firm can produce a given level of output by using more labor and less capital or a greater amount of capital and less labor or moderate amounts of both. A firm continues to substitute one input for another while continuing to produce the same level of output.


If two inputs say labor and capital are allowed to vary, the resulting production function can be illustrated in the figure 12(a).





In this figure each curve (called an isoquant) represents a different level of output. The curves which lie higher and to the right represent greater output levels than curves which are lower and to the left.


For example, point D represents a higher output level of 250 units than point A or B which shows output level of 150 units.


The curve isoquant which represents 150 units of output illustrate that the same level of output (150 units) can be produced with different combinations of labor and capital. Combination of labor and capital represented by A, can employ OL1 quantity of labor and OC1 units of capital to produce 150 units of output.


The combination of labor and capital represented by point B will use only OL2 units of labor and OC1 of capital to produce the same level of output. Thus, if a country has surplus labor and less capital, it may use the combination of labor and capital represented by point A. In case the country has abundant capital and less labor, it might produce at point B. The isoquants through points A and B shows all the different combinations of labor and capita that can be used to produce 150 units of output.

Relevant Articles:

What is Production Function
Short Period Analysis of Production

Long Run Production With Variable Inputs

Properties of Isoquants
Isocost Lines
Marginal Rate of Technical Substitution
Optimum Factor Combination

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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