In economics and microeconomics, the economic region of production is an offshoot of the theory of production function with two variables. It is a cost-oriented theory which defines the region in which the optimal factor combination will lie.[1] It serves as a map of the region of optimal production. Economic region of production consist of negatively sloped portion of all isoquants.
Basic theoryedit
Production lines Q1 and Q2 are the isoquants, depicting the technically efficient factor combinations at different levels of production. The ridge lines A and B demarcate the technically efficient region of production. Above the line OA and below the line OB slope of the isoquants is positive which means that increases in both capital and labour are required to produce a given fixed quantity of output. The ridge lines are the combination of points where marginal product (MPLK) of one of the factors is zero.
The theory entails that there is a limit to how much one factor can be substituted for another. When production reaches a point where substitution between the factors becomes impossible (MPLK), the isoquant becomes positively sloping. No rational entrepreneur will operate at a point outside the ridge lines (Region of Economic Nonsense).[1]
economic, region, production, this, article, multiple, issues, please, help, improve, discuss, these, issues, talk, page, learn, when, remove, these, template, messages, this, article, needs, additional, citations, verification, please, help, improve, this, ar. This article has multiple issues Please help improve it or discuss these issues on the talk page Learn how and when to remove these template messages This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Economic region of production news newspapers books scholar JSTOR September 2014 Learn how and when to remove this template message This article may be too technical for most readers to understand Please help improve it to make it understandable to non experts without removing the technical details March 2011 Learn how and when to remove this template message Learn how and when to remove this template message In economics and microeconomics the economic region of production is an offshoot of the theory of production function with two variables It is a cost oriented theory which defines the region in which the optimal factor combination will lie 1 It serves as a map of the region of optimal production Economic region of production consist of negatively sloped portion of all isoquants Basic theory editProduction lines Q1 and Q2 are the isoquants depicting the technically efficient factor combinations at different levels of production The ridge lines A and B demarcate the technically efficient region of production Above the line OA and below the line OB slope of the isoquants is positive which means that increases in both capital and labour are required to produce a given fixed quantity of output The ridge lines are the combination of points where marginal product MPLK of one of the factors is zero The theory entails that there is a limit to how much one factor can be substituted for another When production reaches a point where substitution between the factors becomes impossible MPLK the isoquant becomes positively sloping No rational entrepreneur will operate at a point outside the ridge lines Region of Economic Nonsense 1 See also editDistribution economics History of microeconomics Production economics Production theory basics Productivity Productivity modelReferences edit a b H L Ahuja Advanced Economic Theory Microeconomic Analysis S Chand 2007 ISBN 81 219 0260 6 Portals nbsp Business nbsp Economics nbsp Banks nbsp Money nbsp Mathematics nbsp This business related article is a stub You can help Wikipedia by expanding it vte Retrieved from https en wikipedia org w index php title Economic region of production amp oldid 1102959826, wikipedia, wiki, book, books, library,
