Consider the smoothie example given in class: Write down the production function of Tutti Frutti Smoothie example given in class

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3 years ago

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Consider the smoothie example given in class: Write down the production function of Tutti Frutti Smoothie example given in class

. Make sure that all ingredients are expressed in Oz. Identify the returns to scale of this production function. Is it decreasing, increasing, or constant returns to scale?

Engineering

1 answer:

mart [117] · Answer 1 · 2022-01-22T10:29:05+03:00

Answer:

Production Function : TFSq = f { ingredient 1 ...... ing. i }

Increasing/ Constant/ Increasing Returns to Scale :

Output change > / = / < Input change respectively

Explanation:

Production Function is the relationship between production inputs & outputs, given technology. It denotes the maximum output that can be generated with given inputs.

Tutti Frutti Smoothie [TFS] quantity = Function of {Ingredient1.....ingredient i}

Returns to Scale represents change in output when all inputs change in same proportion.

Constant Returns to Scale [CRS] : Output Change = All inputs change
Increasing Returns to Scale [IRS] : Output Change > All inputs change
Negative Returns to Scale [NRS] : Output Change < All inputs change

When all inputs (ingredients) change by same proportion i.e get twice 2X :- If output of Tutti Frutti Smoothie increases by > 2X i.e 3X - IRS. If it increases equal ie 2X - CRS. If it increases lesser i.e 1.5X - CRS.