# Analysis of production functions

The horizontal axis measures the size of the population, and the vertical axis the growth per period; both are given in terms of weight.

Diminishing Returns to a Factor Diminishing returns to a factor refers to a situation in which the total output tends to increase at a diminishing rate when more of the variable factor is combined with the fixed factor of production.

Beyond point B, mathematical necessity requires that the marginal curve must be below the average curve See production theory basics for further explanation. At a certain point, the marginal yield will be equal to the costs of the new fishing unit point Q; that is, the level at which net economic yield is highest.

The concepts of average and marginal sustainable yield, whose curves are shown in Figure 5. If fixed inputs are lumpy, adjustments to the scale of operations may be more significant than what is required to merely balance production capacity with demand. A fishery is considered here to be a stock of a species exploited by a group of fishermen, boats or fishing units.

To illustrate this phenomenon, let us return to the data in Figure 7. The catch obtained from a level of effort and its corresponding population equilibrium is called Sustainable or Sustained Yield.

At the boundary between stage 2 and stage 3, the highest possible output is being obtained from the fixed input. Other locations would get sequential numbers. Ut is the abundance; Et is the fishing effort at a specific time; U00 is the index of the catch capacity or population size in the virgin state, and b is a constant.

In the Schaefer analysis, it is assumed that the increase in the biomass of a fishery is a function of the population. Within a part of a system, some tasks must happen in a sequence or process in time order. In theory, a distinction is always drawn between fixed cost and variable cost.

Given that the catch varies with levels of effort, the equilibrium size of the population will differ for each level of effort Figure 5. Analytical or structural methods are used to study population size and dynamics by examining its main components and the changes that they experience.

Changes in fishing effort will produce a change in the equilibrium size of the population, but time will pass before the new equilibrium can be reached.

A given amount of real investment in machines and equipment can be expected to yield a greater flow of output per period of ten years from now than they do today.

In later steps we will identify alternatives, optimize them, and select the best ones to make up the complete system. The production function appears in the micro-economic analysis as one of the two determining factors of the economic sustainability of the firm. A businessman aiming at a state of equilibrium in his business, trying to maximize his profits in the short run, must simultaneously consider the. In the production function itself, the relationship of output to inputs is non-monetary; that is, a production function relates physical inputs to physical outputs, and prices and costs are not reflected in the function. Another common production function is the Cobb-Douglas production function. One example of this type of function is Q=K L This describes a firm that requires the least total number of inputs when the combination of inputs is relatively equal.

PRODUCTION ANALYSIS Production Function •The technological physical relationship between inputs and outputs per unit of time, is referred to as production function. •The relationship between the inputs to the production process and the resulting output is described by a production function.

•“The production function is the name given to. PRODUCTION FUNCTION Objectives After going through this unit, you should be able to: familiarise with the concepts and rules relevant for production decision analysis; understand the economics of production; understand the set of conditions required for efficient production.

In economics, a production function relates quantities of physical output of a production process to quantities of physical inputs or production function refers as the expression of the technological relation between physical inputs and outputs of the goods.

Analysis of production functions
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Production function - Wikipedia