Production function

No matter the objective of any(prenominal) business organization, achievement of efficiency in achievement or cost minimization for a stipulation merchandise bodily process appear to be iodin of the gear up concern of the managers In the managers effort to s set downer deed costs, the fundamental questions he or she faces ar (f) How sens take be optimized or costs minimizes? (g) What will be the behavior of output as remarks growth? (h) How does technology help In trim production costs? 0) How can the least-cost gang of excitants be achieved? J) Given the technology, what happens to the rate of diminish when more plants are added to the firm? The opening of occupation Production theory generally deals with quantitative kindreds, that is, technical and technological relationships in the midst of introduces, especially jab and great(p), and amid inputs and outputs. An input signal Is a good or dish up that goes Into the production process. As economists re fer to It, an Input Is simply anything which a firm buys for apply In Its production process. An output, on the new(prenominal) hand, is any good or proceeds that comes out of a production process.Economists separate ad inputs as (I) labor (II) capital land (iv) raw materials and, (v) time. These varyings are measured per unit of time and once referred to as lam changeables. In recent times, entrepreneurship has been added as ramify of the production Inputs, though this can be measured by the managerial expertness and the ability to make things happen. Inputs are classified as either fixed or variable Inputs. Fixed and variable inputs are defined in twain scotch sense and technical sense. In frugal sense, a fixed input is one whose supply is inelastic in the goldbrick-change sour.In technical sense, a fixed input is one that remains fixed (or constant) for certain(prenominal) level of output. A variable input is one whose supply in the short run is elastic, example, labor, raw terrestrial, and the like. Users of such inputs can enforce a larger cadence in the short run. Technically, a variable Input Is one that changes with changes In output. In the long run, all Inputs are variable 3. 1 The Production Function Production casting is a tool of compendium employ in explaining the input-output relationship. It describes the technical relationship between inputs and output in somatic terms.In its general form, it holds that production of a given commodity depends on certain precise Inputs. In Its specific form, it presents the quantitative relationships between Inputs and outputs. A production affaire whitethorn take the form f a schedule, a graph line or a curve, an algebraical equation or a mathematical model. The production move represents the technology of a firm. An empirical production consort is generally so knotty to include a wide part of inputs land, labor, capital, raw materials, time, and technology.These variables form the Independent variables In a firms actual production function. A firms long- run production function Is of the form where Old = land and building L = labor K = capital M = materials T = technology and, t = time. For involvement of convenience, economists have reduced the number of variables used in a reduction function to yet two capital (K) and labor (L). Therefore, in the analysis of input-output relations, the production function is expressed as Q = f(K, L) (3. 1. 2) Equation (3. . 2) represents the algebraic or mathematical form of the production function. It is this form of production function which is or so commsolely used in production analysis. As implied by the production function (equation (3. 1. 2)), change magnitude production, Q, will require K and L, and whether the firm can increase both K and L or only L will depend on the time period it takes into account for increasing production, that is, whether he firm is thinking in terms of the short run or in terms of the long run.Economists confide that the supply of capital (K) is inelastic in the short run and elastic in the long run. Thus, in the short run firms can increase production only by increasing labor, since the supply of capital is fixed in the short run. In the long run, the firm can employ more of both capital and labor, as the supply of capital becomes elastic everywhere time. In effect, there exists two types of production functions The short-run production function and, The long run production function