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A production function is an equation that establishes relationship between the factors of production i. There are three main types of production functions: a the linear production function, b the Cobb-Douglas production and c fixed-proportions production function also called Leontief production function.
It shows the maximum output which can be obtained for a given combination of inputs. It expresses the technological relationship between inputs and output of a product. In general, we can represent the production function for a firm as:. If there are only two inputs capital K and labour L , we can write production function as:. Limited substitution of one factor for the other.
Each business, regardless of size or complexity, tries to earn a profit:. Total revenue is the income the firm generates from selling its products. We calculate it by multiplying the price of the product times the quantity of output sold:. Total cost is what the firm pays for producing and selling its products. Recall that production involves the firm converting inputs to outputs. Each of those inputs has a cost to the firm.
In economics the long run is a theoretical concept in which all markets are in equilibrium , and all prices and quantities have fully adjusted and are in equilibrium. The long run contrasts with the short run , in which there are some constraints and markets are not fully in equilibrium. More specifically, in microeconomics there are no fixed factors of production in the long run, and there is enough time for adjustment so that there are no constraints preventing changing the output level by changing the capital stock or by entering or leaving an industry. This contrasts with the short run, where some factors are variable dependent on the quantity produced and others are fixed paid once , constraining entry or exit from an industry. In macroeconomics , the long run is the period when the general price level , contractual wage rates, and expectations adjust fully to the state of the economy, in contrast to the short run when these variables may not fully adjust. The differentiation between long-run and short-run economic models did not come into practice until , with Alfred Marshall 's publication of his work Principles of Economics.
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On the other hand, the Long-run production function is one in which the firm has got sufficient time to instal new machinery or capital equipment, instead of increasing the labour units. The production function can be described as the operational relationship between the inputs and outputs, in the sense that the maximum amount of finished goods that can be produced with the given factors of production, under a particular state of technical knowledge. There are two kinds of the production function, short run production function and long run production function. The article presents you all the differences between short run and long run production function, take a read. Basis for Comparion Short-run Production Function Long-run Production Function Meaning Short run production function alludes to the time period, in which at least one factor of production is fixed. Long run production function connotes the time period, in which all the factors of production are variable.
4. Production rnasystemsbiology.org - Free download as Powerpoint Presentation .ppt), PDF File .pdf), Text File .txt) or view presentation slides online. ppt of te be.
The short run production production assumes there is at least one fixed factor input. Total product total output. In manufacturing industries such as motor vehicles, it is straightforward to measure how much output is being produced.
The production function relates the maximum amount of output that can be obtained from a given number of inputs. In economics, a production function relates physical output of a production process to physical inputs or factors of production. It is a mathematical function that relates the maximum amount of output that can be obtained from a given number of inputs — generally capital and labor. The production function, therefore, describes a boundary or frontier representing the limit of output obtainable from each feasible combination of inputs. Firms use the production function to determine how much output they should produce given the price of a good, and what combination of inputs they should use to produce given the price of capital and labor.
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In traditional production theory resources used for the production of a product are known as factors of production.