Meaning



Meaning:

The process of transformation of input into output is known as production. In other words the process of creating utility is known as production.

 

Production Function:

Production function explains the technological relationship between inputs and outputs. It shows the functional relationship between physical input and output. Or it shows how much physical output can be produced by using the given physical input and given state of technology. Mathematically production function is expressed as

Q = F (L, Ld, C, M, T, N, ……..)

Where,

Q = quantity of output

F = functional relationship

L = labor

Ld = land

C = capital

M = management

T = technology

N = national resources

 

But generally production function is written as Q = F (L, C)

 

 

Production function is divided into two parts:

 

  1. Short run production function:
    Short run is short time period where producer can change the output only by changing labor not capital. So, in short run production function is written as Q = F(L, C)
    Where,
    Q = output
    F = functional relationship
    L = labor
    C = constant capital
  2. Long run production function:
    Long run is the long time period and in the long time period producer can change all input to change the output. So, in long run Q = F ( K, L)
    Where,
    Q = output
    F = functional relationship
    K = capital
    L = labor

 


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