Chapter 5
Production
and
Cost Theory
, Topic Learning
Outcomes
At the end of this topic, student should be
able :
1.To understand short run production
2. To discuss stages of production
3. To discuss the short run and long run
costs
,Production
Theory
, Production
Production: is a process of transforming production
factors or inputs into goods and services.
Production period: Production involves time and time is
classified as short-run (SR) and long-run (LR) periods.
i) In SR the firm uses fixed inputs (FI) & variable iputs(VI)
to create goods and services.
ii) In LR, it uses only VI
FI: Inputs that cannot be varied in the period under
consideration. Example machines, tools and equipment.
VI: Inputs that can be changed according to the level of
output. Examples raw materials, labor.
Production
and
Cost Theory
, Topic Learning
Outcomes
At the end of this topic, student should be
able :
1.To understand short run production
2. To discuss stages of production
3. To discuss the short run and long run
costs
,Production
Theory
, Production
Production: is a process of transforming production
factors or inputs into goods and services.
Production period: Production involves time and time is
classified as short-run (SR) and long-run (LR) periods.
i) In SR the firm uses fixed inputs (FI) & variable iputs(VI)
to create goods and services.
ii) In LR, it uses only VI
FI: Inputs that cannot be varied in the period under
consideration. Example machines, tools and equipment.
VI: Inputs that can be changed according to the level of
output. Examples raw materials, labor.
