What to produce - continues

As promised I am back with a suitable example for the producer’s production. Suppose a cultivator holds one acre of fertile land which he can put of the production of either wheat or paddy. Naturally he will have to incur some costs in cultivation the land and these cost may be even different for wheat and paddy. Also, he will expect to sell his output assuming that he does not need any from this acre of land for his own consumption.

The price that he will get in the market for wheat or paddy might also be different. The cultivator’s profitability is given by the difference between what he gets for his output from the market and his cost of production. Whether the cultivator produces wheat or paddy on his acre of land, he can usually change his output a little by changing his cost of production. For example, if he spends more on fertilizers, his output of wheat increases so that on the one hand his cost of production rises, on the other hand the value of the output also increases. Naturally he chooses that cost which will give him the maximum profit from the cultivation of wheat from that acre of land.