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Karnataka Class 12 Commerce Economics Chapter 4 Production And Cost Complete Notes

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost : Cakart team members provides here Karnataka Class 12 Commerce Economics Production Cost Complete Notes and other Karnataka Class 12 Commerce Economics Complete Notes in pdf format. We provides you direct link for downloading Karnataka Class 12 Commerce Economics Production Cost Complete Notes in pdf format. Download Karnataka Class 12 Commerce Economics Production Cost Complete Notes and read well.

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost :  Cakart team members provides here Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes and other Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes in pdf format. We provides you direct link for downloading Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes in pdf format. Download Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes and read well.

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost : Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost unit includes  Introduction, Concept of production function – Isoquants, Marginal Rate of Technical Substitution – Concept of Total Product, Average Product and Marginal Product – Short Run and Long Run analysis of production – The Law of Variable proportion – Returns to scale, Production Cost – Concept of Cost – Classification of Short run cost – Long run cost – Other types of costs.

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost : This chapter introduces what economics is and why people are sometimes confused by the subject. In addition to the jargon that economists use, economics requires a different way of thinking about problems from the way most people are used to. While economists disagree on many topics, there are some basic principles that they do agree on.

1) Karnataka Class 12 Commerce Economics Production Cost

“Cost of Production” is meant the total sum of money required for the production of a specific quantity of output. In the word of Gulhrie and Wallace: “In Economics, cost of production has a special meaning. It is all of the payments or expenditures necessary to obtain the factors of production of land, labor, capital and management required to produce a commodity. It represents money costs which we want to incur in order to acquire the factors of production”. In the words of Campbell: “Production costs are those which must be received by resource owners in order to assume that they will continue to supply them in a particular time of production”.

Download here Karnataka Class 12 Commerce Economics Production Cost Complete Notes in pdf format

Elements of Cost of Production: The following elements are included in the cost of production:

(a) Purchase of raw machinery,

(b) Installation of plant and machinery,

(c) Wages of labor,

(d) Rent of Building,

(e) Interest on capital,

(f) Wear and tear of the machinery and building,

(g) Advertisement expenses,

(h) Insurance charges,

(i) Payment of taxes,

(j) In the cost of production, the imputed value of the factor of production owned by the firm itself is also added,

(k) The normal profit of the entrepreneur is also included In the cost of production.

Normal Profit: By normal profit of the entrepreneur is meant in economics the sum of money which is necessary to keep an entrepreneur employed in a business. This remuneration should be equal to the amount which he can earn in some other alternative occupation. If this alternative return is not met, he will leave the enterprise and join alternative line of production.

Types/Classifications of Cost of Production: Prof, Mead in his book, “Economic Analysis and Policy” has classified these costs into three main sections:

(1) Production Costs: It includes material costs, rent cost, wage cost, interest cost and normal profit of the entrepreneur.

(2) Selling Costs: It includes transportation, marketing and selling costs.

(3) Sundry Costs: It includes other costs such as insurance charges, payment of taxes and rate, etc., etc.

2) Karnataka Class 12 Commerce Economics Concept Of Production Function

 production function relates physical output of a production process to physical inputs or factors of production. The production function is one of the key concepts of mainstream neoclassical theories, used to define marginal product and to distinguish allocative efficiency, the defining focus of economics. The primary purpose of the production function is to address allocation efficiency in the use of factor inputs in production and the resulting distribution of income to those factors, while abstracting away from the technological problems of achieving technical efficiency, as an engineer or professional manager might understand it. Production function denotes an efficient combination of inputs and outputs.

In macroeconomics, aggregate production functions are estimated to create a framework in which to distinguish how much of economic growth to attribute to changes in factor allocation (e.g. the accumulation of capital) and how much to attribute to advancing technology. Some non-mainstream economists, however, reject the very concept of an aggregate production function.

Download here Karnataka Class 12 Commerce Economics Concept Of Production Function Complete Notes in pdf format 

The supply of a product, depends upon its cost of production, which in turn depends upon:

(a) The physical relationship between inputs and output, and

(b) The prices of inputs.

The physical relationship between inputs and output plays an important part in determining the cost of production. It is the general description of this physical relation between inputs and output which forms the subject-matter of the theory of production. In other words, the theory of production relates to the physical laws governing production of goods.

The act of production involves the transformation of inputs into outputs. The word production in economics is not merely confined to bringing about physical transformation in the matter it is creation or addition of value.

Therefore, production in economics also covers rendering of services such as transporting, financing, and marketing. Laws of production, or in other words, the generalisations regarding relations between inputs and outputs developed all these types of production.

The relation between inputs and output of a firm has been called the ‘Production Function’. Thus, the theory of production is the study of production functions. The production function of a firm can be studied by holding the quantities of some factors fixed, while varying the amount of other factors.

This is done when the law of variable proportions is derived. The production function of a firm can also be studied by varying the amounts of all factors. The behaviour of production when all factors are varied is the subject-matter of the laws of returns to scale. Thus, in the theory of production, the study of (a) the law of variable proportions and (b) the laws of returns to scale is included.

Besides this, the theory of production is also concerned with explaining which combination of inputs (or factors of production) a firm will choose so as to minimise its costs of production for producing a given level of output or to maximize output for a given level of cost.

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost :  Production is the result of co-operation of four factors of production viz., land, labour, capital and organization. This is evident from the fact that no single commodity can be produced without the help of any one of these four factors of production.

Therefore, the producer combines all the four factors of production in a technical proportion. The aim of the producer is to maximize his profit. For this sake, he decides to maximize the production at minimum cost by means of the best combination of factors of production.

Features of Production Function:

Following are the main features of production function:

1. Substitutability:

The factors of production or inputs are substitutes of one another which make it possible to vary the total output by changing the quantity of one or a few inputs, while the quantities of all other inputs are held constant. It is the substitutability of the factors of production that gives rise to the laws of variable proportions.

2. Complementarity:

The factors of production are also complementary to one another, that is, the two or more inputs are to be used together as nothing will be produced if the quantity of either of the inputs used in the production process is zero.

The principles of returns to scale is another manifestation of complementarity of inputs as it reveals that the quantity of all inputs are to be increased simultaneously in order to attain a higher scale of total output.

3. Specificity:

It reveals that the inputs are specific to the production of a particular product. Machines and equipment’s, specialized workers and raw materials are a few examples of the specificity of factors of production. The specificity may not be complete as factors may be used for production of other commodities too. This reveals that in the production process none of the factors can be ignored and in some cases ignorance to even slightest extent is not possible if the factors are perfectly specific.

Production involves time; hence, the way the inputs are combined is determined to a large extent by the time period under consideration. The greater the time period, the greater the freedom the producer has to vary the quantities of various inputs used in the production process.

In the production function, variation in total output by varying the quantities of all inputs is possible only in the long run whereas the variation in total output by varying the quantity of single input may be possible even in the short run.

Karnataka Class 12 Commerce Economics Chapter 4  Production And Cost Complete Notes

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