We have detail information of Production Function Definition Types & Importance. Labour, Capital, land and entrepreneurship is the four gactor of production function.
Production Function Definition Types & Importance
Following is the detail information.
Meaning
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, labor, capital, organization, and technology) and output.
According to Prof Watson
” The relation between a firm’s physical production (output) and the material factors of production (inputs) is production function.
The production function can be expressed symbolically as
Q = f(Ld, L, K, O, T, R, E, …) … (i)
Q = f(L, K)
TYPES OF PRODUCTION FUNCTION
Following are the types of production types.
1. 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.
Q = f(L,K)
Where,
Q= Output
l = Labour
K = Capital
2. Long Run Production Function:
Long run production function is defined as the production function in which all inputs are variable.
Q = f(L, K)
Q= Output
l = Labour
K = Capital
USES/ IMPORTANCE OF PRODUCTION FUNCTION IN BUSINESS DECISION
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. Following are the uses or importance of production function:
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. Help in determining the optimal allocation of resources such as labor, capital, and raw materials.
Other Important Links:
a. Cobb-Douglas Production Function Formula: CLICK HERE
b. Learning Curve: Theory: CLICK HERE
c. Isoquant: Meaning and Properties: CLICK HERE
Frequently Asked Question
a. What is Production function?
= The production function is purely a technical relation which connects factor inputs and output.
b. What is production function formula?
= Following is the formula of production function:
Q = f(Ld, L, K, O, T, R, E, …) … (i)
Q = f(L, K)
Where, Q = Output
Ld = Land
L = Labor
K = Capital
O = Organization.
c. What is the importance of production function?
= Following is the importance of production function:
- It provides valuable information for decision-making.
- To determine least cost combination of inputs.
- Help in determining the optimal allocation of resources such as labor, capital, and raw materials.
- Can be use for forecasting and planning purposes.
