What is Production Function?
Definition and Explanation:
Production of goods requires
resources or inputs. These inputs are called factors of
production named as land, labor, capital and organization. A
rational producer is always interested that he should get the
maximum output from the set of resources or inputs available to
him. He would like to combine these inputs in a technical
efficient manner so that he obtains maximum desired output of
goods. The relationship between the inputs and the resulting
output is described as production function.
function shows the relationship between the amounts of
factors used and the amount of output generated per period of
It can be expressed in algebraic
form as under:
X = f (a1, a2
This equation tells us the quantity
of the product X which can be produced by the given quantities
of inputs (lands labor, capital) that are used in the process of
production. Here it may be noted that production function shows
only the maximum amount of output which can be produced from
given inputs. It is because production function includes only
efficient production process.
The analysis of production function
is generally carried with reference to time period which is
called short period and long period. In the short run,
production function is explained with one variable factor and
other factors of productions are held constant. We have called
this production function as the
Variable Proportions or the
In the long run, production function
is explained by assuming all the factors of production as
variable. There are no fixed inputs in the long run. Here the
production function is called the Law of Returns
according to the scale of production.
As it is difficult to
handle more than two variables in graph, we therefore, explain
the Law of Returns according to scale of production by assuming
only two inputs i.e., capital and labor and study how output
responds to their use.