Question

Draw and label a production function.

a) What happens to output as we increase our input?

b) What determines the production function, or what is the production function a “function of?”

c) Given the production function factors, what specific national policies would increase growth? Give one potential policy for each factor.

d) Think about convergence theory or the “piggy back” effect we talked about with Southeast Asia. Draw two production functions, one for the United States and one for Thailand (they need to be related to each other, so one should be bigger than the other). What is the difference between the two production functions? Hypothetically, where is each country at on their production function?

Answer 1

Date .............. Solution : The procluction function shows the relationship (functional) between input and output suppose the input are land, labour, Capital and enterprise. When we are utilise this inputs how much output that we are to produce. Q = f ( land, labour, Capital, entreprise) Q- Output example a. we are considering two factors I land and labour where land is I fired factor and labour is variable factor. ya sleep - Shay - + Total pradere fivity Outpul? (Total productivity Merginal productivity Arnage productivity > Average productivity labour Marginal productivity

a stage I : 3 Stago a - 1d ir fi It is from origin to point b and this stago called increasing retuons to the factor here the Total productivity is increasing te increasing rate and then increases at decreasing take. Marginal productivity. incoear and reaches maximum and then starts falling. Average productivity starts from the origin and then increases till its maximum point. Stage I: It is from point b to point d. And this stage is called diminishing detuns to the factor. Here the Total productivity increase at a decreasing scele till it reaches the maximum point Marginal productivity falls Continously till is equal to zero. Average produchun falls continuosly

Date :....... Stage Ill. This is from point d to poind onwards and called Negative returns to the factor. Flere the Total productivity falls and the marginal productivity It becomes negative. Average productivity become fall continously.