Returns to scale & cobb douglas production function
Returns to scale, in economics, the quantitative change in output of a firm or industry resulting from a proportionate increase in all inputs. The long run refers to a time period where the production function is defined on the basis of variable factors only. No fixed factors exist in the long run and all factors become variable. Thus, the scale of...
The law of variable proportions
Theory of Production In the words of Ferguson, “ The theory of production consists of how the producer, given the state of technology combines various inputs to produce a definite amount of output in an economically efficient manner.” Theory of production also seeks to explain the relationship between input and output Theory of production is mainly concerned with two things...
law of supply
Law of supply states that other factors remaining constant, price and quantity supplied of a good are directly related to each other. In other words, when the price paid by buyers for a good rises, then suppliers increase the supply of that good in the market. Law of supply depicts the producer behavior at the time of changes in the...
Revealed preference theory
Revealed preference theory, in economics, a theory, introduced by the American economist Paul Samuelson in 1938, that holds that consumers’ preferences can be revealed by what they purchase under different circumstances, particularly under different income and price circumstances. The theory entails that if a consumer purchases a specific bundle of goods, then that bundle is “revealed preferred,” given constant income and prices, to any other bundle...
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