By: Dalia Campos & AJ Coleman

Theory dealing with the relationship between the factors of production & the output of goods & services.

Theory Of Production;

The theory of production is generally based on short-run and long-run. For example getting a job over the holiday season is short-run while getting a career is a long-run.

Production period so short that only variable inputs can be changed

Short RunLong Run Production period long enough to change

amount of variable & fixed inputs used in product.

Law Of Variable Proportion

Rule stating that short-run outputs will change as one input is varied while others are held.

Raw Material Unprocessed natural resources used in production

Timber, Iron Ore, Coal, Gold, Silver, Grain, Animals, Tobacco, Sugar, Spices

Examples of Raw Material;

Total

ProductTotal output produced by a firm.

Total product curve

Marginal

ProductExtra output due to the addition one more unit of input.

Stage of

ProductionPhrase of production increasing,

decreasing and negative returns

Three Stages Of Production: Stage I; In this stage the company

will increase productivity.Stage II; Illustrated the principal of

diminishing returns, the stage where output increases at a

diminishing rate as more units of a variable inputs are added.

Stage III; In this stage a non-mixed factor is added or increase output ceases to increase and may even

begin to decrease.

Diminishing Returns

Stage of production where output increases at a decreasing rate as more units of variable input are added.

What is the theory of production?

How are short-run and long-run different?

What are some examples of Raw Material?

How do the three stages of Production work?

What happens after the second stage of production?

The relationship between the factors of production and the output of goods & services

Short run is temporarily and Long run is permanent

Wood, Coal, Iron & Plastic First stage is that the

company increases productivity Second Stage the total production keeps growing little by little, making more supply to sell to buyers. Finally in Stage 3 marginal production becomes negative meaning production decreases.

Marginal production decreases.