The forms of capital are:
1. Physical capital or Material Resources.
2. Money Capital or Monetary Resources, and
3. Human Capital or Human Resources.

(i) The inputs that a firm uses in the production process are called factors of production.
(ii) It includes factor inputs and non-factor inputs

(i) It is assumed that only two factors are used to produce a commodity.
(ii) Factors of production can be divided into small parts
(iii) Technique of production is constant.
(iv) Under the given techniques, factors of production can be used with maximum efficiency.

(i) Firms will supply less at lower prices and more at higher prices.
(ii) As price of the commodity increases, the amount supplied also increases.
(iii) So, supply curve has a positive slope from left to right.

(i) The iso-cost line must be tangent to iso-quant curve,
(ii) At point of tangency, the iso-quant curve must be convex to the origin.

(i) Iso-cost line represents a combination of inputs which show the same amount of cost.
(ii) It gives information on factor prices and financial resources of the firm.

Basis for comparison	Short - run production function	Long - run production function
Meaning	Short run production function alludes to the time period in which at least one factor of production is fixed	Long run production function connotes the time period in which all the factors of production are variable.
Law	Law of variable proportions	Law of returns to scale.
Scale of production	No change in scale of production.	change in scale of production
Factor - ratio	Changes	Does not change
Entry and exit	There are barriers to entry and the firms can shut down but cannot fully exit.	Firms are free to enter and exit

Total Product:
(i) It refers to the total amount of commodity produced by combination of all inputs in a given period of time.
(ii) It can be calculated in two ways
TP = AP x N (or) AP = TP / N
Average Product:
(i) It refers to the output per unit of the input (or) 
\(AP=\frac { TP }{ Q } (or)N\)
(ii) It is the result of the total product divided by the total output.

(i) Capital is man-made.
(ii) Capital is mobile between places and persons.
(iii) Capital is a positive factor of production.
(iv) Capital's supply is elastic.
(v) Capital's demand is derived demand.
(vi) Capital is durable.

(i) Charles Cobb and Paul Douglas have given a linear homogeneous production function.
(ii) A proportionate increase in the factors leads to a proportionate increase in output.
(iii) There is constant returns to scale with only labour and capital.
(iv) The elasticity of substitution between the factors is one.
Q = AL^{\(\alpha \)}K^{\(\beta \)}
Q = output; A = positive constant; K = Capital; L = Labour, \(\alpha \) + \(\beta \) = 1

Producer's equilibrium happens when there is maximum output with minimum cost ie. optimum combination of the factors of production.
The two conditions to be fulfilled are
1. The iso-cost line must be tangent to iso-quant curve.
2. At the point of tangency, iso-quant must be convex and MRTS_LK must be declining.

3. The producer is in equilibrium at E.
Slope of iso-quant curve = Slope of iso-cost curve.

(i) Labour is the animate factor of production.
(ii) It is an active factor of production
(iii) Labour implies several types
(iv) Labour is perishable
(v) Labour is inseparable from the labourer
(vi) Labour is less mobile between places and occupations.
(vii) Labour is a means as well as ends
(viii) Labour units are heterogeneous.
(ix) Supply of labour determines its reward
(x) Individual labour has weak bargaining power.

Introduction:
(i) Scale of production refers to the ratio of factors of production.
(ii) Every producer wants to reduce the cost of production.
(iii) When there is large scale production he enjoy lot of advantages.
(iv) These advantages are called economies of scale.
(v) Marshall divided them into internal economies and external economies.
Internal Economies:
They refer to advantages enjoyed by a firm.
Technical Economies:
When there is large scale production, there is more capital, new technology, research and development.
Financial Economies:
Big firms can float shares in the market for capital expansion.
Managerial Economies:
(i) Specialisation of labour is followed.
(ii) There is delegation of work.
Labour Economies:
(i) There is division of labour.
(ii) Quality and productivity increases.
Marketing Economies:
(i) Producers can buy raw materials at cheaper cost.
(ii) Transport cost is less.
(iii) They enjoy bargaining power.
Economies of survival:
(i) Product diversification is possible.
(ii) This reduces the risk in production.
(iii) Even if the market for one product falls, the market for other commodities offsets it.
External Economies:
(i) They refer to changes in any factor outside the firm causing an improvement in the production process.
(ii) These advantages are enjoyed by all the firms in the industry due to the structural growth.
Example:
1. Increased transport facilities.
2. Banking facilities.
3. Development of townships.
4. Development of information and communication.