Production function (Nov’10)

Q. Define Production function (Nov’10)

Production is the process by which inputs are transformed in to outputs. Thus there is relation between input and output. The functional relationship between input and output is known as production function. The production function states the maximum quantity of output which can be produced from any selected combination of inputs. In other words, it states the minimum quantities of input that are necessary to produce a given quantity of output.

The production function is largely determined by the level of technology. The production function varies with the changes in technology. Whenever technology improves, a new production function comes into existence. Therefore, in the modern times the output depends not only on traditional factors of production but also on the level of technology.

The production function can be expressed in an equation in which the output is the dependent variable and inputs are the independent variables. The equation is expressed as follows:

Q= f (L, K, T……………n)

Where,

Q = output

L = labour

K = capital

T = level of technology

n = other inputs employed in production.

There are two types of production function - short run production function and long run production function. In the short run production function the quantity of only one input varies while all other inputs remain constant. In the long run production function all inputs are variable.

Assumptions of Production Function

The production function is based on the following assumptions.

1. The level of technology remains constant.

2. The firm uses its inputs at maximum level of efficiency.

3. It relates to a particular unit of time.

4. A change in any of the variable factors produces a corresponding change in the output.

5. The inputs are divisible into most viable units.