Horti-Business Management (2+0)

Product – product relationship

• The farmer has limited resources with which he has to maximize the revenue from the farm. Therefore, it is essential for the farmer to decide the crops or enterprises that he has to undertake so as to maximize the farm income. The nature of combination of enterprises and the rate of product substitution will influence the optimum combination of enterprises.
ii. Production possibility curve (PPC) or Iso-resource Curve

• The Production Possibility Curve is a line connecting all combinations outputs of two enterprises or crops that can be produced using a given amount of input.
iii. Marginal Rate of product substitution (MRPS)

MRPS is the rate of change in quantity of output of one enterprise (Y₁) as a result of unit increase in the output of the other enterprise (Y₂), for a given level of input (X). It is also known as Marginal Rate of Product Transformation (MRPT). So it is the slope of the PPC.

MRPS = ∆Y₁/∆Y₂