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The production function can have many uses. It can be used to compute least-cost factor combination for a given output or maximum output combination for a given cost. Knowledge of production function can be helpful in deciding on the value of using a variable factor in the production process. As long as marginal revenue productivity of a variable factor exceeds its price, it would be profitable to increase its use. When marginal revenue productivity of factor becomes equal to its price the extra employment of the factor must be stopped. Because the production function demonstrates the returns to scale it would help in the decision making. If the returns to scale are diminishing, it's not worthwhile to increase production. Opposite would be true if returns to scale are increasing.
State the types of demand elasticity Income Elasticity: Elasticity of demand with respect to change in consumer's income. Price Expectation Elasticity of Demand: Elast
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Where does the firm Operate? The firm will avoid stages I, II and III and will instead choose stage II. It will avoid stage I because this shall involve using the fixed facto
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Goals of the firm How much is produced by a firm depends on its objectives. A firm which aims to maximise its sales revenue, for example, will generally supply a greater quant
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