9. The short run and long run do not correspond to any specific period of calendar time. Explain.

10.           What is a production function?

11. Use functional notation to express the production function.

12. What is total product? Describe the shape of the total product curve.

13. Describe the behaviour of total product when marginal product is

a) Rising

b) Positive

c) Positive but falling

d) Negative

14. If labour and capital can be substituted and the wage rate rises, what adjustment will the firm likely make?

15. What is the principle of substitution? What is the relation between this principle and the cost-minimization condition?

9. Short run means at least one of the inputs used by producer is fixed. So if any one of the inputs is fixed. It means we are referring to short run.

But in long run, all the inputs using by producer is variable and we can change and substitute between the inputs

10. The production function is the technological relationship between the units of physical inputs (like land and capital etc.) and the units of the output of a good.

11. The production function is the technological relationship between the units of physical inputs (like land and capital etc.) and the units of the output of a good.

The functional notation to express the production function:

Q =f( Z₁,Z₂,Z₃.....Z_n)

Where Q is the units of a good, and Z₁, Z₂,...Z_n is the quantities of factor inputs. (these are the units of capital, labor, or materials)

Example

Let's say that a firm is producing tables with two factors inputs labor and capital. Then the production function as a functional notation is:

Q = f(L,K)

12. Total product is the total quantity of output that a firm can produce within a given period of time by utilizing given inputs.

Total product curve indicates the quantities of output that can be obtained from different amounts of variable factor inputs assuming other factor inputs remain constant. The total product curve is S shaped. At its lower level labor and output both are low, when labor is added production will increase at increasing rate.

13. (aA) when marginal product is rising, total product increases at an increasing rate.

     (b) When marginal product is positive, is always increasing.

     (c) Total product starts rising at a diminishing rate when marginal product is positive but falling.

     (d) Total product starts falling when marginal product is negative.

14. If Labor and capital both can be substituted it means of there is increase in any one of the inputs then it can be substitute for the other input.

As in this case as there is increase in wages means labor has become costly. So more capital will be used.

15. Principle of substitution means if there is any increase in prices of any input or goods, then it can be completely substituted by other input or other good.

In the cost minimization condition

MP1/ MP2 = P1/ P2

Here MP1 and MP2 is the marginal productivity of input 1 and 2. And P1 and P2 is the input prices. so this condition relates between cost minimize and substitution.

If producer can easily substitute between the inputs he can effectively minimize cost.