Estimation of Short Run Production Function (A Case Study of Shakarganj Mills Limited)
10 Pages Posted: 31 May 2011
Date Written: May 30, 2011
The production function is a mathematical expression which relates the quantity of factor inputs to the quantity of outputs that result. The short run is a period of time in which at least one input is fixed. For that purpose we have used the time series data of Shakarganj Mills limited having 28 observations (Dec. 2003-Sep. 2010).
We have used the multiple regression analysis for estimation of results. We have estimated Total revenue product of labor and Total resource cost of labor we find out optimal labor units 1003 at that point marginal revenue product of labor is equal to marginal resource cost of labor and at that point the firm’s profit is maximum. The firm should hire 1003 units of labor and here the profit of the firm will be the maximum and if firm hire more labor than 1003 units of labor then marginal productivity of labor decreases and the firm will bear loss.
Keywords: Optimal level of one variable input, Shakarganj Sugar Mills Pvt Ltd Jhang, Marginal Resource Cost of Labor, Marginal Revenue Product of Labor
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