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    RKC

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    Pooja
    Productivity concerns were reported at RKC Group 5. The document discusses returns to scale, production functions, and analyzing costs. It provides examples of how total, average, and marginal productivity change as the number of workers is increased from 0 to 10. The examples show stages of increasing, constant, and diminishing returns. Later sections define economies of scale and scope, and provide examples of how average costs can decrease with higher output volumes or a greater variety of goods.

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    RKC

    Uploaded by

    Pooja
    208 views13 pages
    Productivity concerns were reported at RKC Group 5. The document discusses returns to scale, production functions, and analyzing costs. It provides examples of how total, average, and marginal productivity change as the number of workers is increased from 0 to 10. The examples show stages of increasing, constant, and diminishing returns. Later sections define economies of scale and scope, and provide examples of how average costs can decrease with higher output volumes or a greater variety of goods.

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    Productivity concerns were reported at RKC Group 5. The document discusses returns to scale, production functions, and analyzing costs. It provides examples of how total, average, and marginal productivity change as the number of workers is increased from 0 to 10. The examples show stages of increasing, constant, and diminishing returns. Later sections define economies of scale and scope, and provide examples of how average costs can decrease with higher output volumes or a greater variety of goods.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    208 views13 pages

    RKC

    Uploaded by

    Pooja
    Productivity concerns were reported at RKC Group 5. The document discusses returns to scale, production functions, and analyzing costs. It provides examples of how total, average, and marginal productivity change as the number of workers is increased from 0 to 10. The examples show stages of increasing, constant, and diminishing returns. Later sections define economies of scale and scope, and provide examples of how average costs can decrease with higher output volumes or a greater variety of goods.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Productivity concerns

    at RKC
    GROUP 5
    Mahesh Telangi Praveen P A. Santosh Kumar

    Harsh Kumar Akshay Sagar


    2

    CONCEPTS

    • Returns of Scale/Law of Variable Proportions


    • Importance of Production and cost analysis
    • Production Function
    • Isoquants
    • Economies of Scale and Scope
    3

    Returns to scale/law of variable proportions

    • Definition:
    “The term returns to scale refers to the changes in output as all factors change by the same
    proportion.”
    “Returns to scale relates to the behavior of total output as all inputs are varied and is a long
    run concept”.
    • Returns to scale types:
    A. Constant Returns to scale.
    B. Increasing Returns to Scale
    C. Diminishing Returns to Scale
    4

    Analysis of given data


    90

    80

    No of workers Total Productivity Average productivity


    Marginal productivity 70
    0 0 0 0 Stage 1
    60
    1 10 10.00 10
    2 22 11.00 12 50
    3 36 12.00 14 Stage 2
    4 52 13.00 16 40
    5 66 13.20 14
    30
    6 76 12.67 10 Stage 3
    7 82 11.71 6 20
    8 85 10.63 3
    10
    9 85 9.44 0
    10 83 8.30 -2 0
    1 2 3 4 5 6 7 8 9 10 11
    -10
    Total Productivity Average productivity Marginal productivity
    5

    Importance of Production and cost analysis

    • Definition:
    “The term returns to scale refers to the changes in output as all factors change
    by the same proportion.” Koutsoyiannis
    “Returns to scale relates to the behavior of total output as all inputs are varied
    and is a long run concept”. Leibhafsky
    • Returns to scale types:
    1. Increasing Returns to scale.
    2. Constant Returns to Scale
    3. Diminishing Returns to Scale
    6

    Stage 1

    • Total productivity
    Increases at increasing rate and then at diminishing rate
    • Marginal productivity
    Increases in the beginning then reaches a maximum and begins to decrease
    • Average productivity
    First increases, continues to increase and become maximum
    7

    Stage 2

    • Total productivity
    Continues to increases at diminishing rate and become maximum
    • Marginal productivity
    Continues to diminish and becomes equal to zero
    • Average productivity
    Becomes equal to Marginal productivity and begins to diminish
    8

    Stage 3

    • Total productivity
    Diminishes
    • Marginal productivity
    Becomes Negative
    • Average productivity
    Continues to diminish but will remain positive
    9
    Activity Labour Capital
    Choosing and buying the site
    Designing and building
    Buying, planning materials and labor
    Levelling the land

    Labour Intensive &


    Drawing the layout of the building
    Excavation and laying the foundation
    Erecting the frame of the building
    Initial wiring
    Putting the roof
    Capital Intensive
    Classification
    Constructing the walls and interiors
    Plastering of ceiling and walls
    Plumbing and wiring
    Finishing the inside walls and paintings
    Installing fixtures
    Flooring
    Painting
    Decorating and Landscape
    10
    EXAMPLE

    250 Isoquant
    200 • Q = A x L^α x K^ β
    150 Assuming:
    100
    A, α , β = 1
    50

    0
    50 100 150 200 250 300 350 400 450 500 550
    11

    ECONOMIES OF SCALE ECONOMIES OF SCOPE

    • Cost advantage when there is an • The average total cost of a company's


    increased output of a good or service production decreases when there is an
    due to the inverse relationship between increasing variety of goods produced.
    the average cost per unit and output
    level
    • Complementary variety of products
    • Quantity of output is increased
    • Eg: Facility management services
    • Eg: More labour inducted into work provided in addition to construction
    12

    GRAPHS
    THANK YOU
    FEEDBACK

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