Theory of Production and Cost For SEBI Grade A Exam

Theory of Production and Cost For SEBI Grade A Exam

Theory of Production and Cost helps us understand the relationship between the price and output of a particular commodity. It is crucial to minimize risks and maximize profits for a profit in business. Multiple factors are responsible for determining Theory of Production and Cost. Various theories are discussed in economics showing a relationship between a product’s price and output. Theory of Production and Cost For SEBI Grade A Exam is asked in Paper 2 Economics. Candidates can expect questions can come from this topic. We provide SEBI Grade A Non Video Course consisting of Phase 1 and 2 Mock Tests, Paper 2 Study, and Revision Notes. Take the course to improve your knowledge of Economics topic i.e. Theory of Production and Cost.

Law of Diminishing Returns

Law of Diminishing Returns operates in the short studies of the change in output by varying the quantity of input. It is applicable only when we cannot change the production. The Law of Diminishing Returns states that if an increase in the quantity of one input happens in combination with other fixed inputs. The Marginal Physical Productivity of the variable input declines with time. Assumptions Related to Law Of Diminishing Returns are discussed below.

• State of Technology Constant: We should assume that the state of technology is constant in applying Law of Diminishing Returns. A variable technology state would impact the marginal and average product. However, we are unable to calculate input and output for a product.
• Keep One Input Variable: We keep one input variable on applying Law of Diminishing Returns. We keep our inputs constant place. This law is not applicable in that case when all inputs are variable. If it happens then, returns to scale come to the rescue.
• Does Not Applicable in Production Scenario: The law is not applicable production scenario. We require fixed proportions of inputs. An increase in any input would not cause an impact on production. The marginal product will be equal to zero.
• Considering Physical Inputs & Outputs: We consider physical inputs and outputs. It is not associated with economic profitability in monetary terms.

Theory of Production and Cost For SEBI Grade A Exam, Video

Get insights regarding Theory of Production and Cost discussed in this video for the SEBI Grade A Exam. Candidates can check this video to know basic concepts related to Theory of Production and Cost taught by a mentor.