Production Function
PRODUCTION
Production
Creation of Utilities Utility: want satisfying capacity of a commodity Types of utilities: T f ili i
Form utility Place utility Time utility Possession utility Service utility Knowledge utility
The Production Function
The production function refers to the physical relationship between the inputs or resources of a firm and their output of goods and services at a given period of time. time. The production function is dependent on different time frames. Firms can produce for a brief or lengthy period of time.
Inputs - are resources that contribute in the production of a commodity. Most resources are classified into three categories: g
Land, Labor, Capital.
Enterprise p
The relationship between physical inputs & physical outputs of a firm is referred as production function:
P = f (a, b, c…….n) (a b c n) Where, P = rate of output Wh t f t t a, b, c …..n = inputs
Fixed vs. Variable Inputs
Fixed inputs -resources used at a constant amount in the production of a commodity. Variable inputs - resources that can change in quantity p g q y depending on the level of output being produced. The longer planning the period, the distinction between g p g p fixed and variable inputs disappears, i.e., all inputs are variable in the long run.
Scale of operation
Increased scale of operation
Bigger or better machines Employment of more workers Purchase of larger quantities of raw materials Use f large quantities of other inputs U of l titi f th i t
Economies of scale
Internal economies External economies
Internal economies
Technical economies
Economies of increased dimensions Economies of linking processes Economies of superior techniques Economies of specialization & division of l b E i f i li ti di i i f labour
Managerial economies Marketing economies Financial economies Risk bearing economies
External economies
Economies of concentration Economies of information Economies of di i E i f disintegration i
Production
Creation of Utilities Utility: want satisfying capacity of a commodity Types of utilities: T f ili i
Form utility Place utility Time utility Possession utility Service utility Knowledge utility
The Production Function
The production function refers to the physical relationship between the inputs or resources of a firm and their output of goods and services at a given period of time. time. The production function is dependent on different time frames. Firms can produce for a brief or lengthy period of time.
Inputs - are resources that contribute in the production of a commodity. Most resources are classified into three categories: g
Land, Labor, Capital.
Enterprise p
The relationship between physical inputs & physical outputs of a firm is referred as production function:
P = f (a, b, c…….n) (a b c n) Where, P = rate of output Wh t f t t a, b, c …..n = inputs
Fixed vs. Variable Inputs
Fixed inputs -resources used at a constant amount in the production of a commodity. Variable inputs - resources that can change in quantity p g q y depending on the level of output being produced. The longer planning the period, the distinction between g p g p fixed and variable inputs disappears, i.e., all inputs are variable in the long run.
Scale of operation
Increased scale of operation
Bigger or better machines Employment of more workers Purchase of larger quantities of raw materials Use f large quantities of other inputs U of l titi f th i t
Economies of scale
Internal economies External economies
Internal economies
Technical economies
Economies of increased dimensions Economies of linking processes Economies of superior techniques Economies of specialization & division of l b E i f i li ti di i i f labour
Managerial economies Marketing economies Financial economies Risk bearing economies
External economies
Economies of concentration Economies of information Economies of di i E i f disintegration i