Production and Production Function
Production is the process of transformation of factor inputs into outputs. Also, production is the process of creating utility in goods and services. The process of production is divided into three stages; Inputs, Processes, and Outputs.
Production Function:
The production function is a technical or mathematical relationship between inputs of production and output. Inputs like land, labor, capital, and entrepreneurs are known as factors of production. Factors of production are classified into fixed and variable factors on the basis of whether their quantity can be changed within a short period of time or not. It can be mathematically expressed as;
Q=f(L,K,La,E,R,T..)
Where,
Q= Amount
L= Labor
K= Capital
La= Energy or fuel
E= Energy or fuel
R= Raw materials
T= Technologies
The production function is divided into the following two groups;
- Short-run production function
- Long-term production function
1. Short-run Production Function:
A production function in which some factors of production are fixed and some factors are variables is called a short-run production function. Short-run is a time interval that is too short to change all the factors of production. A producer cannot change the amount of capital such as machines, tools, equipment, factory houses, etc. A producer can change the amounts of variable factors of production such as labor, etc. Mathematically, it is expressed as;
Q= f(L, K’)
Here,
Q= Output
L= Labor (variable)
K’= Capital (constant)
2. Long-run Production Function:
It is the time period in the production in which all the factors of production are variable or changeable. In the long-term, there is sufficient time to change all the factors of production, so the producer can change all inputs and install the plant capacity needed for profit maximization. Mathematically, it can be expressed as;
Q= f(L, K)
Here,
Q= Output
L= labor
K= Capital
Note: Here, both labor and capital are variables.
