LEC 14-15 PRODUCTION AND BUSINESS.ppt

8/20/2019 LEC 14-15 PRODUCTION AND BUSINESS.ppt

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PRODUCTION AND

BUSINESSORGANISATION



PRODUCTION AND BUSINESS

ORGANISATIONS

We will study:-We will study:-

What is the prdu!ti" #u"!ti"$What is the prdu!ti" #u"!ti"$

%w s!ales # prdu!ti" a##e!t retur"s$%w s!ales # prdu!ti" a##e!t retur"s$ %w te!h"l&i!al !ha"&e a##e!ts the prdu!ti"%w te!h"l&i!al !ha"&e a##e!ts the prdu!ti"

#u"!ti"$#u"!ti"$

What is prdu!ti'ity a"d the a&&re&ateWhat is prdu!ti'ity a"d the a&&re&ateprdu!ti" #u"!ti"$prdu!ti" #u"!ti"$

What are di##ere"t types # (usi"essWhat are di##ere"t types # (usi"ess

r&a"isati"s a"d hw they #u"!ti"$r&a"isati"s a"d hw they #u"!ti"$



THE PRODUCTIONTHE PRODUCTIONFUNCTIONFUNCTION

• What are di##ere"t i"puts tWhat are di##ere"t i"puts t

prdu!e s)e &d$prdu!e s)e &d$

• **The relati"ship (etwee"The relati"ship (etwee"

the a)u"t # i"put "eededthe a)u"t # i"put "eededa"d the a)u"t # utputa"d the a)u"t # utput

that !a" (e (tai"ed isthat !a" (e (tai"ed is

!alled the!alled the production production

function.” function.”

• Ta+e the e,a)ple #Ta+e the e,a)ple #

&e"erati"& ele!tri!ity (y&e"erati"& ele!tri!ity (y

usi"& di##ere"t i"putsusi"& di##ere"t i"puts



THE PRODUCTIONTHE PRODUCTIONFUNCTIONFUNCTION

• %ere. ur assu)pti" is that #ir)s always try t%ere. ur assu)pti" is that #ir)s always try t

prdu!e e##i!ie"tlyprdu!e e##i!ie"tly

• What are tw )ai" te!h"i/ues # prdu!ti"$What are tw )ai" te!h"i/ues # prdu!ti"$

• Capital-i"te"si'eCapital-i"te"si'e

• 0a(ur-i"te"si'e0a(ur-i"te"si'e

• These te!h"i/ues are part # the prdu!ti"These te!h"i/ues are part # the prdu!ti"#u"!ti"#u"!ti"

• 1illi"s # di##ere"t prdu!ti" #u"!ti"s 2 "e1illi"s # di##ere"t prdu!ti" #u"!ti"s 2 "e

#r ea!h a"d e'ery prdu!t r ser'i!e#r ea!h a"d e'ery prdu!t r ser'i!e



TOTAL, AVERAGE, ANDTOTAL, AVERAGE, ANDMARGINAL PRODUCTMARGINAL PRODUCT

• What is )ea"t (y ttal prdu!t$What is )ea"t (y ttal prdu!t$

• **Ttal a)u"t # utputTtal a)u"t # utput prdu!edprdu!ed33

• What is )ea"t (y )ar&i"al prdu!t$What is )ea"t (y )ar&i"al prdu!t$

• **E,tra utput prdu!ed (y "e e,tra u"it # a"E,tra utput prdu!ed (y "e e,tra u"it # a"

i"put. while +eepi"& ther i"putsi"put. while +eepi"& ther i"puts !"sta"t!"sta"t33

• What is )ea"t (y a'era&e prdu!t$What is )ea"t (y a'era&e prdu!t$

•

**Ttal utput di'ided (y ttal u"its #Ttal utput di'ided (y ttal u"its # i"puti"put33









PRODUCTIVITY AND AGGREGATEPRODUCTIVITY AND AGGREGATEPRODUCTION FUNCTIONPRODUCTION FUNCTION

• What is )ea"t (y prdu!ti'ity$What is )ea"t (y prdu!ti'ity$

• **The !"!ept t )easure the rati # ttalThe !"!ept t )easure the rati # ttal

utput t a wei&hted a'era&e # i"puts3utput t a wei&hted a'era&e # i"puts3

• Tw I)prta"t 4aria"ts:-Tw I)prta"t 4aria"ts:-

• **0a(ur Prdu!ti'ity. whi!h !al!ulates the0a(ur Prdu!ti'ity. whi!h !al!ulates the

a)u"t # utput per u"it # la(ur3a)u"t # utput per u"it # la(ur3

• Ttal 5a!tr Prdu!ti'ity. whi!h )easuresTtal 5a!tr Prdu!ti'ity. whi!h )easures

utput per u"it # ttal i"puts 6typi!ally !apitalutput per u"it # ttal i"puts 6typi!ally !apital

a"d la(ur73a"d la(ur73



PRODUCTIVITY GROWTH FROMPRODUCTIVITY GROWTH FROMECONOMIES OF SCALE ANDECONOMIES OF SCALE AND

SCOPESCOPE• Re!all tw 'aria"ts # prdu!ti'ity8 what areRe!all tw 'aria"ts # prdu!ti'ity8 what are

they$they$

• ** 9es. they are la(ur prdu!ti'ity a"d 9es. they are la(ur prdu!ti'ity a"d TtalTtal

5a!tr Prdu!ti'ity5a!tr Prdu!ti'ity33

• The". what is prdu!ti'ity &rwth$The". what is prdu!ti'ity &rwth$

• **The utput &rwi"& #aster tha" i"puts3The utput &rwi"& #aster tha" i"puts3

• Prdu!ti'ity &rws due t te!h ad'a"!esPrdu!ti'ity &rws due t te!h ad'a"!es

6i"!ludi"& pr!ess prdu!t i""'ati"s7 a"d6i"!ludi"& pr!ess prdu!t i""'ati"s7 a"d

(e!ause # e!")ies # s!ale a"d s!pe(e!ause # e!")ies # s!ale a"d s!pe



PRODUCTIVITY GROWTH FROMPRODUCTIVITY GROWTH FROMECONOMIES OF SCALE ANDECONOMIES OF SCALE AND

SCOPESCOPE• E!")ies # s!ale a"d )ass prdu!ti" ha'e ledE!")ies # s!ale a"d )ass prdu!ti" ha'e led

t prdu!ti'ity &rwth si"!e the I"dustrialt prdu!ti'ity &rwth si"!e the I"dustrial

Re'luti"Re'luti"

• 5r e&. a lar&e ship i" ;<5r e&. a lar&e ship i" ;< thth !e"tury !uld !arry!e"tury !uld !arry

)a,i)u) # =>>> t"s # &ds8 tday lar&e il)a,i)u) # =>>> t"s # &ds8 tday lar&e il

ta"+ers !arry 'er "e )illi" # il.ta"+ers !arry 'er "e )illi" # il.

•

A di##ere"t +i"d # prdu!ti'ity arises ut #A di##ere"t +i"d # prdu!ti'ity arises ut #e!")ies # s!pee!")ies # s!pe

• **Tday. )st PCs !"tai" se'eral additi"alTday. )st PCs !"tai" se'eral additi"al

#eatures. #r i"sta"!e. we( pa&e. wrd pr!essi"&.#eatures. #r i"sta"!e. we( pa&e. wrd pr!essi"&.

data sheet. prese"tati"s. et!3data sheet. prese"tati"s. et!3



FLIP SIDE OF ECONOMIES OFFLIP SIDE OF ECONOMIES OFSCALE AND SCOPESCALE AND SCOPE

• I"!reasi"& s!ale a"d s!pe !a""t i"!rease utputI"!reasi"& s!ale a"d s!pe !a""t i"!rease utput

e"dlesslye"dlessly

• As #ir)s (e!)e lar&er a"d lar&er. pr(le)s #As #ir)s (e!)e lar&er a"d lar&er. pr(le)s #

)a"a&e)e"t a"d !rdi"ati" seep i")a"a&e)e"t a"d !rdi"ati" seep i"

• I" rder t )a+e )a,i)u) pr#it. a #ir) )ayI" rder t )a+e )a,i)u) pr#it. a #ir) )ay

e,pa"d i"t se'eral di##ere"t (usi"ess se!trs. re,pa"d i"t se'eral di##ere"t (usi"ess se!trs. r

e,pa"d its (usi"ess &e&raphi!allye,pa"d its (usi"ess &e&raphi!ally

• This )i&ht lead t a phe")e"" li+e &reatThis )i&ht lead t a phe")e"" li+e &reat

e)pires #a!e:e)pires #a!e: *Bei"& !rushed u"der "e?s w"*Bei"& !rushed u"der "e?s w"

wei&ht3wei&ht3



BUSINESS ORGANISATIONS –BUSINESS ORGANISATIONS –The Nature o the F!r"The Nature o the F!r"

• I" e'ery type # e!")y. prdu!ti" #u"!ti" isI" e'ery type # e!")y. prdu!ti" #u"!ti" is

!arried ut (y the (usi"ess r&a"isati"s. s)all.!arried ut (y the (usi"ess r&a"isati"s. s)all.

)ediu) a"d lar&e)ediu) a"d lar&e

• Busi"ess r&a"isati"s e,ist #r )a"y reas"s.Busi"ess r&a"isati"s e,ist #r )a"y reas"s.

(ut the )st i)prta"t is that(ut the )st i)prta"t is that they are spe!ialised i"they are spe!ialised i"

)a"a&i"& the pr!ess # prdu!ti")a"a&i"& the pr!ess # prdu!ti"

•

They per#r) the #llwi"& i)prta"t #u"!ti"s:-They per#r) the #llwi"& i)prta"t #u"!ti"s:-• E!")ies # )ass prdu!ti"E!")ies # )ass prdu!ti"

• Raisi"& #u"dsRaisi"& #u"ds

• Or&a"isi"& #a!trs # prdu!ti"Or&a"isi"& #a!trs # prdu!ti"



BIG, SMALL ANDBIG, SMALL ANDINFINITESIMAL BUSINESSESINFINITESIMAL BUSINESSES

• Prdu!ti" i" )ar+et e!")y ta+es pla!e i" #ir)Prdu!ti" i" )ar+et e!")y ta+es pla!e i" #ir)

• @> )ill di##ere"t (usi"esses i" USA. (ut )st #@> )ill di##ere"t (usi"esses i" USA. (ut )st #

the) w"ed (y a si"&le pers" 2 I"dthe) w"ed (y a si"&le pers" 2 I"d

PrprietrshipPrprietrship

• Others are part"erships 2 w"ed (y tw r uptOthers are part"erships 2 w"ed (y tw r upt

=>> part"ers=>> part"ers

• The lar&est (usi"esses 2 !rprati"s TheyThe lar&est (usi"esses 2 !rprati"s They

d)i"ate i" areas # sales. pr#its. assets. sie #d)i"ate i" areas # sales. pr#its. assets. sie #

payrll. e)ply)e"t. pliti!al a"d e!")i! pwerpayrll. e)ply)e"t. pliti!al a"d e!")i! pwer

•

Ti"y (usi"esses pred)i"ate i" "u)(ers8 (ut theirTi"y (usi"esses pred)i"ate i" "u)(ers8 (ut theirshare i" re'e"ue is ust a #ra!ti" # the (i !r s





THE INDIVIDUALTHE INDIVIDUALPROPRIETORSHIPPROPRIETORSHIP

• **1) a"d Pp3 stres 2 5a)ily Busi"esses1) a"d Pp3 stres 2 5a)ily Busi"esses

• 1ay d a daily (usi"ess # a #ew dllars1ay d a daily (usi"ess # a #ew dllars

• Tre)e"dus e##rts are "eeded t ru" theseTre)e"dus e##rts are "eeded t ru" these

• Wr+i"& hurs 2 > r > hrs per wee+. al)st "Wr+i"& hurs 2 > r > hrs per wee+. al)st "

'a!ati"s'a!ati"s

• A'era&e (usi"ess li#e 2 "e yearA'era&e (usi"ess li#e 2 "e year

• Still pre#erred (y s)eStill pre#erred (y s)e

•

There are a #ew su!!ess stries as wellThere are a #ew su!!ess stries as well

LEC 14-15 PRODUCTION AND BUSINESS.ppt

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