Question

What resource condition determines that the Short Run Production Function is appropriate for investigating input-to-output relationships for a firm? Also, explain the logical relationships that exist between Total Product (Q), Marginal Product (MP = ΔQ/ΔL) and Average Product (AP=Q/L) in the short run

Answer 1

A Short run production function shows the maximum quantity of output that can be produced by a set of inputs holding one factor of production constant. The short run production function states that output is a function of labour. So the resource condition Labour determines that the short run production function is appropriate for investigating input-to-output relationships for a firm.

Total Product  (Q) : It is the the total quantity or total output of particular good produced during a specified period of time. It can be raised only by increasing the quantity of variable factors employed in production

Marginal Product (MP = ΔQ/ΔL) : The marginal product of an input is the addition to total product resulting from the addition of one unit of input, when the amount of other input are constant.

Average Product (AP=Q/L) : The average product of an input is the total product divided by the amount of input used to produce this amount of output.

- If MP > AP then AP is raising

- If MP < AP then AP is falling

- If MP = AP then AP is maximized