Home Page                Contact Us                About Us                Privacy Policy                Terms of Use                Advertise               

 

Home Production Function What is Production Function

What is Production Function?

 

Definition and Explanation:

 

Production of goods requires resources or inputs. These inputs are called factors of production named as land, labor, capital and organization. A rational producer is always interested that he should get the maximum output from the set of resources or inputs available to him. He would like to combine these inputs in a technical efficient manner so that he obtains maximum desired output of goods. The relationship between the inputs and the resulting output is described as production function.

 

A production function shows the relationship between the amounts of factors used and the amount of output generated per period of time.

 

Formula:

 

It can be expressed in algebraic form as under: 

   

X = f (a1, a2 ,........, an)

 

This equation tells us the quantity of the product X which can be produced by the given quantities of inputs (lands labor, capital) that are used in the process of production. Here it may be noted that production function shows only the maximum amount of output which can be produced from given inputs. It is because production function includes only efficient production process.

 

The analysis of production function is generally carried with reference to time period which is called short period and long period. In the short run, production function is explained with one variable factor and other factors of productions are held constant. We have called this production function as the Law of Variable Proportions or the Law of Diminishing returns.

 

In the long run, production function is explained by assuming all the factors of production as variable. There are no fixed inputs in the long run. Here the production function is called the Law of Returns according to the scale of production.

 

As it is difficult to handle more than two variables in graph, we therefore, explain the Law of Returns according to scale of production by assuming only two inputs i.e., capital and labor and study how output responds to their use.

Relevant Articles:

What is Production Function
Short Period Analysis of Production

Long Run Production With Variable Inputs

Isoquants
Properties of Isoquants
Isocost Lines
Marginal Rate of Technical Substitution
Optimum Factor Combination
 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance
History of Money

 

                   Home Page                Contact Us                About Us                Privacy Policy                Terms of Use                Advertise               

All the material on this site is the property of economicsconcepts.com. No part of this website may be reproduced without permission of economics concepts.
All rights reserved Copyright
2010 - 2012