Question

1. Give the production function. Name & explain each variable.

Answer 1

Production Function : The process of transformation of of inputs into outputs is called production. Output is the function of inputs. The relationship between inputs used and output produced by a firm is called production function. It is the relationship between the quantity of inputs used in production and the level of output. The production function is largely determined by the level of technology. 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 variable while all other inputs remain constant. In the long run production function all inputs are variables.

The production can be expressed in equation in which the output is the dependent variable and inputs are the independent variable.

The equation is as follows :

Q = ( L, K, T..........n)

where,

Q = Output, it is the maximum amount of output that can be produced from all of the given inputs.

L = Labor, it is the human work that is given as an input. It is a variable factor of production.

K = Capital, these are the amounts of capital given as input.

T = Level of technology, it denotes the efficiency for the given level of inputs.

n = Other inputs employed in production.

Assumptions of Production Function

(a) The level of technology remains constant.

(b) The firm uses its inputs at maximum level of efficiency.

(c) It relates to a particular unit of time.

(d) There are two factors of production, namely, Labor(L), and Capital(K).

(e) A change in any of the variable factors produce a corresponding change in the output.

(f) The inputs are the divisible into most viable units.