Production Function

Production Function

Production function refers to the relationship among units of the factors of production (inputs) and the resultant quantity of a good produced (output).

According to George J. Stigler, “Production function is the relationship between inputs of productive services per unit of time and outputs of product per unit of time.”

Production function may be expressed as: Q = f (N, L, K, T) Where, Q = Quantity of output, N = Land; L = Labour; K = Capital; and T = Technology. Depending on the efficiency of the producer, this production function varies.

The function implies that the level of output (Q) depends on the quantities of different inputs (N, L, K, T) available to the firm.

Short-run Production and Long run Production

In Micro economics, the distinction between long run and short run is made on the basis of fixed inputs that inhibit the production.

The short-run is the period where some inputs are variable, while others are fixed. Another feature is that firms do not enter into the industry and existing firms may not leave the industry.

Long run, on the other hand, is the period featured by the entry of new firms to the industry and the exit of existing firms from the industry.

In general, Production function may be classified into two

·           Short-run Production Function as illustrated by the Law of Variable Proportions.

·           Long-run Production Function as explained by the Laws of Returns to Scale.