Production Function and The Law of variable proportions
Production Function and Analysis The term, “production” means the transformation of physical ‘inputs’ into physical ‘output’ Or we can say that production is concerned with the way in which resources [inputs] are employed to produce a firm’s products [outputs]. The term ‘inputs’ or ‘factors of production’ includes all those things which are required by the firm to produce a particular product. Economists have classified input as labour, capital, land, and organization. Along with these four factors, there are some more factors added to the factors of production, for example, raw materials, power, fuel, technology, time and services like transports and communications, warehouse, marketing, banking, shipping and insurance, etc. Thus the term ‘input’ has a wider meaning in economics. While ‘Output’ refers to finished products. Production Function: A production function describes the technological relationship between inputs and output in physical terms. It specifies a flow of outp...