Inventory Management : Every firm requires raw material. It would be stored in inventories. What would be the ideal stock of inventories ? How the stock of inventories should be maintained and controlled

1. ME FOR M.COM

2. • Production with One Variable Input Labour (L) Capital (K) Total
Output (TP) Average Product (AP) 0 1 2 3 4 5 6 7 8 9 10 10 10 10 10
10 10 10 10 10 10 10 Marginal Product (MP) 0 10 30 60 80 95 108
112 112 108 100 Short run Production Function with Labour as
Variable factor
• 9. Production with One Variable Input Labour (L) Capital (K) Total
Output (TP) Average Product (AP) 0 1 2 3 4 5 6 7 8 9 10 10 10 10 10
10 10 10 10 10 10 10 0 10 30 60 80 95 108 112 112 108 100 10 20 30
20 15 13 4 0 -4 -8 - 10 15 20 20 19 18 16 14 12 10 Marginal Product
(MP) Short run Production Function with Labour as Variable factor

3. • 10. A C B Total Product Labor per month 3 4 8 84 3 E Average product
Marginal product Output per month 112 Labor per month 60 30 20
10 D
• 11. Law of Production Function 1) Laws of Variable proportion- Law of
Diminishing Return ( Short run production function with at least one
input is variable) 2) Laws of Return scales – Long run production
function with all inputs factors are variable.

4. • 14. A C B Total Product Labor per month 3 4 8 8 4 3 E Average product
Marginal product Output per month 112 Labor per month 60 30 20
10 D First Stage Second Stage Third Stage