Learning Objectives

To exemplify principles used in optimal employment of input in the short run, To understand the basic concepts in production analysis, To understand how production decisions are taken in the long run, To appreciate the various aspects of empirical production function 

A manager is faced with a choice problem of 'how to produce?' He has to make a decision about the combination of fixed and variable quantities that should be employed to produce a good most efficiently. That is, he has to decide about the input combination. This requires, firstly the engineering or technological information on production possibilities (the production function) and, secondly economic data on prices of inputs and output (cost analysis).  

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