Production Function As A Graph
Any of these equations can be plotted on a graph. A typical (quadratic) production function is shown in the following diagram under the assumption of a single variable input (or fixed ratios of inputs so the can be treated as a single variable). All points above the production function are unobtainable with current technology, all points below are technically feasible, and all points on the function show the maximum quantity of output obtainable at the specified level of usage of the input. From the origin, through points A, B, and C, the production function is rising,ve beyond point X. From point A to point C, the firm is experiencing positive but decreasing marginal returns to the variable input. As additional units of the input are employed, output increases but at a decreasing rate. Point B is the point beyond which there are diminishing average returns, as shown by the declining slope of the average physical product curve (APP) beyond point Y. Point B is just tangent to the steepest ray from the origin hence the average physical product is at a maximum. Beyond point B, mathematical necessity requires that the marginal curve must be below the average curve (See production theory basics for further explanation.).
Read more about this topic: Production Function
Famous quotes containing the words production, function and/or graph:
“To expect to increase prices and then to maintain them at a higher level by means of a plan which must of necessity increase production while decreasing consumption is to fly in the face of an economic law as well established as any law of nature.”
—Calvin Coolidge (1872–1933)
“As a medium of exchange,... worrying regulates intimacy, and it is often an appropriate response to ordinary demands that begin to feel excessive. But from a modernized Freudian view, worrying—as a reflex response to demand—never puts the self or the objects of its interest into question, and that is precisely its function in psychic life. It domesticates self-doubt.”
—Adam Phillips, British child psychoanalyst. “Worrying and Its Discontents,” in On Kissing, Tickling, and Being Bored, p. 58, Harvard University Press (1993)
“In this Journal, my pen is a delicate needle point, tracing out a graph of temperament so as to show its daily fluctuations: grave and gay, up and down, lamentation and revelry, self-love and self-disgust. You get here all my thoughts and opinions, always irresponsible and often contradictory or mutually exclusive, all my moods and vapours, all the varying reactions to environment of this jelly which is I.”
—W.N.P. Barbellion (1889–1919)