Marginal physical product (MPP) is the change in the level of output due to a change in the level of variable input restated, the MPP is the change in TPP for each unit of change in quantity of variable input. The economic concept of marginal physical product can help explain this point. In this example, the manager would not use more than 15 units because the 16th unit does not increase production, and using more than 16 units actually decreases production. Second, managers should not use so much variable input that the output actually declines.
Line 6 pod farm no input series#
The idea that the production function is a series of enterprises is expanded on in subsequent sections. The production function could be described as a combination or series of enterprise analyses wherein each point on the production function represents a different enterprise that is, a different recipe or combination of fixed inputs and variable input. Production function- illustrates the relationship between the quantity of variable input and the level of output.Total physical product (TPP) - Quantity of output (Y) that is produced from a firm's fixed inputs and a specified level of variable inputs (X).The axes represent the number of physical units used (variable input or X) and the number of physical units produced (output or Y). A graph may improve our understanding of the concept ( graph 1).However, using 7 units of variable input during the production period would allow the business to produce 28 units of output. In this example, using 2 units of variable input will result in producing 3 units of output. This table does not identify the fixed inputs, but it indicates how the level of output changes if the manager changes the quantity of variable input used during the production period. A table of data can be used to present this relationship.The relationship between the level of variable input and level of output can be illustrated with a production function. Seldom do businesses use identical “recipes” to produce similar (substitutable) products. For example, you use a different recipe and a different combination of ingredients than I do, but we both can produce a delicious chocolate cake. Each business uses a slightly different combination of inputs to produce similar outputs. The answer for one business will be different than the answer for another business.
Production Function and Stages of Production - Applying the Concept of Diminishing Marginal Productivityīased on the assumptions of a goal of profit maximization and making decisions in the short run, combined with our understanding of diminishing marginal productivity, the question is "what level of input should a manager use and what level of output should the manager produce to maximize profit."