Categories: Microeconomics

Production Decisions of a firm

Cost Constraints:

Firms in particular, must consider the prices of labor, capital and other inputs. Because just as a consumer is constrained by limited budget so does the producer has to be concerned about the cost of its production.

Input Choices:

The firm must choose the amount of input to be used in the production of each unit. Again its just like a consumer takes account of the prices of different product before deciding to buy anything . So does the producer takes account of the prices of different inputs for its production. Because if the price of input increase, consequently the output or the price of final product will also increase which will lead to lower demand of that particular product.

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Marjan Arbab

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