Production and Production Function

 

Production

It is the process of creating utility in goods and services through the use of factors of production. In other words, it is the process of transferring inputs into outputs.

Production Function:

It is defined as the functional or mathematical relationship between physical output and physical inputs. It tells the production of a commodity depends upon certain specific inputs. It presents the quantitative relationship between inputs and outputs. It also represents the technology of a firm, industry or an economy as a whole. It can be generally expressed as:

Q=f( Lb, L, K,M,T,t)

Where:

Q=Output

Lb=Land and Building

K=Capital

T=Technology

f=function

L=Labor

M=Materials

t=time

For the simplification, we consider only two factors labor (L) and Capital (K). Now, the production function can be expressed as:

Q=f(L,K)

Types of Production Function:

a.    Short-Run Production Function

It is the time period in which a firm can not change all of its inputs or factors of production. In the short-run, some of the factors of production like land, factory size, machinery, etc, remains constant or fixed but some factors of production like labor, fuel, raw material, etc are variable. Thus, the short-run production function is the mathematical or technical relationship between inputs and output when quantities of some inputs are kept constant and quantities of one input are varied. For simplicity, if we take only two factors production labor and capital, the general form of the short-run production function can be expressed as: Q=f(L, Capital constant).

b.    Long- Run Production Function

It is the time period that a firm can change all of its inputs or factors of production. In the long run, all the factors of productions are variable. It is the technical or mathematical relationship between inputs and outputs when all inputs are variable. It can be expressed as Q=f(L,K).