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Input-Output Relationship: Danna C. Barredo

1. The input-output relationship indicates that productive resources like materials, money, machines must undergo a transformation process before being converted into products. This production process is called technology. 2. Enterprises that apply efficient technology have an economic advantage in terms of lower costs, higher quality, and greater quantity. These enterprises are more successful in the market. 3. Costs of production represent payments for factors of production like labor, capital, land, and entrepreneurship. These costs affect a company's ability and willingness to produce. Fixed costs do not vary with output while variable costs do vary with output.

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Danna Barredo
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42 views15 pages

Input-Output Relationship: Danna C. Barredo

1. The input-output relationship indicates that productive resources like materials, money, machines must undergo a transformation process before being converted into products. This production process is called technology. 2. Enterprises that apply efficient technology have an economic advantage in terms of lower costs, higher quality, and greater quantity. These enterprises are more successful in the market. 3. Costs of production represent payments for factors of production like labor, capital, land, and entrepreneurship. These costs affect a company's ability and willingness to produce. Fixed costs do not vary with output while variable costs do vary with output.

Uploaded by

Danna Barredo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

INPUT-OUTPUT

RELATIONSHIP
C

DANNA C. BARREDO
Transformation
Process
The illustration of input-output
relationship indicates that
productive resources, such as
materials, money, machines and
others have to undergo a
processing stage before they are
transformed into products. Such
process of production is referred to
as TECHNOLOGY.
Clearly, enterprises which
apply proper and efficient
technology have the
economic advantage in
terms of costs, quality, and
quantity. Naturally, such
enterprises are the winners in
the market.
Transformation
Process
Inputs to the
transformation
process
-High quality
people are
employed
-Capital
investment is
focused on
efficiency and
quality
Outputs from the transformation
process
• Primary Sector
- Extraction of natural resources (e.g. oil, gas) and farming
activities
• Secondary Sector
- The secondary sector is also often referred to as the
"manufacturing sector“
• Tertiary Sector
- Providing a service of some kind. E.g. health, travel, legal,
finance, building, security.
COST OF
PRODUCTION
C

DANNA C. BARREDO
Costs of production
represent the payments
for the factors of
production. These affect
the ability and willingness
of entrepreneurs to
produce.
PRODUCERS must choose productive
resources which are abundant in supply,
because these are much cheaper than
scarce resources. Cheaper inputs mean
lower costs of production. In terms of profits,
lower costs of production favor the
producers. In the rural areas, there are
many raw materials that can be used for
the creation of products. Their use should be
maximized not only to produce foods, but
also to create jobs for the rural poor.
When you start a small
business, you will have two
types of expenses: fixed
costs and variable costs.
Fixed costs do not change
with sales volume, but
variable costs do.
FIXED COST
Costs associated with your business' product that must
be paid regardless of the volume of that product or
service you sell. No matter how much you sell or don't
sell, you still have to pay your fixed costs.
VARIABLE COST
Costs which vary/change with the change in units
produced. This includes cost of raw material, packaging
cost, shipping cost, inventory cost, sales commission and
so on.
The total costs of production is the
sum total of expenses in producing
a product or service. It is also
equivalent to the sum of fixed cost
and variable cost. The former
remains constant regardless of the
volume of production while the
latter changes in proportion to the
volume of production
RENTS are fixed cost while
expenses on raw materials are
variable cost. If there is no
production, there is no variable
cost, but there is fixed cost. Total
costs divided by the number of
goods produced equals average
cost or unit cost.

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