We have Production Function – Definition Formula Types, Importance and Example.
Production Function – Definition Formula Types
Following are the detail information
Definition
Production function is defined as functional relationship between physical inputs and physical output of a firm. The production function is the functional or mathematical or technical relationship between these inputs (land, labour, capital, organization and technology) and output.
The production function can be expressed symbolically as
Q = f(Ld, L, K, M, O, T, R, E, …) … (i)
Q = f(L, K)
Where
- Q = the Level of Output
- Ld = Land or Building
- l = Land
- K = Capital
- T = Technology
- M = Raw Material
Uses or Importance of production functions
Production function shows the technical or mathematical relationship between physical output and physical inputs. It is very important in the economic analysis of production and making business decisions.
The uses or importance of production function can be explained as follows:
1. To determine least cost combination of inputs
2. To determine the value of employing a variable input
3. To take long run production decision
4. To make the capacity planning.
5. To allocate the available resources.
Types of Production Function
There are two types of production functions. They are Short Run production function and Long run production function.
Brief Introduction
a. Short Run Production Function:
Short run production function is defined as the production function in which some inputs are variable and some inputs are fixed. In short run production function with only one variable input is also termed as single input variable production function.
Q = f(L,K)
b. Long Run Production Function:
Long run production function is defined as the production function in which all inputs are variable.
Q = f(L, K)
Where,
- Q= Level of output
- L = Labour
- K = Capital
Other Important Links:
a. MBS 1st Semester Syllabus: CLICK HERE
b. MBS 1st Semester Managerial Economics Notes: CLICK HERE
Frequently Asked Question:
a. What is Production Function?
= Production function is the functional relationship between physical inputs and physical output of a firm.
b. Types of Production function
= There are two types of production function. They are:
i. Short Run Production Function
ii. Long Run Production Function
