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.
Q = f(L,K)
In the words of Watson, “Production Function is the relationship between a firm’s production (output) and the material factors of production (input).”
Table of Content
- Assumptions of Production Function
- Graphical Representation of Production Function
- Features of Production Function
- Types of Production Function
- Concept of Product
Production is a process that business uses to convert inputs into outputs. Production involves a series of activities that convert the inputs into outputs that people can use for the fulfilment of their needs. Production is basically the transformation of inputs into output. Input is anything that is utilised in the creation of a commodity and Output is something that gets produced at the end of the production process. The relationship between inputs and outputs is defined using the Production Function.
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