Assumptions of Production Function

What is Production Function?

Production Function is the relationship between physical inputs (land, labour, capital, etc.) and physical outputs (quantity produced). It is a technical relationship (not an economic relationship) that studies material inputs on one hand and material outputs on the other hand. Material inputs include variable and fixed factors of production. In a standard equation, the Production function is represented by Q, Labour (Variable element) is represented by L, and Capital (Fixed element) is represented by K....

Assumptions of Production Function

Both inputs and outputs are divisible.There are only two factors of production, i.e., land (Variable element) and capital (Fixed element).Factors of production are imperfect substitutes.Technology is constant....

Graphical Representation of Production Function

For example, When there are 4 units of labour and 5 units of capital, the equation for the production function is Q = f(4,5)....

Features of Production Function

1. Complementary: A producer will have to combine the inputs to produce outputs. Outputs can not get generated without the use of inputs....

Types of Production Function

Production function on the basis of the time period can be divided into two categories: Short Run Production Function and Long Run Production Function. In these production functions, the combination and behaviour of variable factors and fixed factors are different....

Concept of Product

Product or output refers to the volume of the goods that the company produces using inputs during a specified period of time. The concept of product can be looked at from three different angles: Total Product, Marginal Product, and Average Product....