国外厂商理论讲稿.pptx

The Theory of the FirmThe Theory of the FirmProduction FunctionProduction FunctionStates the relationship between inputs and outputs.Inputs – the factors of production classified as:Land – all natural resources of the earth – not just ‘terra firma’! Price paid to acquire land = RentLabour – all physical and mental human effort involved in production.Price paid to labour = WagesCapital – buildings, machinery and equipment not used for its own sake but for the contribution it makes to production.Price paid for capital = InterestProduction FunctionInputsProcessOutputLandProduct or service generated– value addedLabourCapitalAnalysis of Production Function:Short RunIn the short run at least one factor fixed in supply but all other factors capable of being changed.Reflects ways in which firms respond to changes in output (demand).Can increase or decrease output using more or less of some factors but some likely to be easier to change than others.Increase in total capacity only possible in the long runAnalysis of Production Function:Short RunIn times of rising sales (demand) firms can increase labour and capital but only up to a certain level – they will be limited by the amount of space. In this example, land is the fixed factor which cannot be altered in the short run.Analysis of Production Function:Short RunIf demand slows down, the firm can reduce its variable factors – in this example it reduces its labour and capital but again, land is the factor which stays fixed.Analysis of Production Function:Short RunIf demand slows down, the firm can reduce its variable factors – in this example, it reduces its labour and capital but again, land is the factor which stays fixed.Analysing the Production Function: Long RunThe long run is defined as the period of time taken to vary all factors of production.By doing this, the firm is able to increase its total capacity – not just short term capacityAssociated with a change in the scale of productionThe period of time varies accordin