Rajasthan Board RBSE Class 12 Economics Notes Chapter 6 Production Function
There is. a direct relationship of supply of goods and services with their price.
If prices of goods and services increase, then supply of goods and services increases and if price decreases, then supply of goods and services decreases.
The supply of goods and services depends upon the quantity of production, while the quantity of production depends on the cost of input, and the quantitative relationship between the nieans of production and output.
In production function, there is a mutual relationship between production and the resources that contribute to production.
Function is a technical term of maths, which means the quantitave relationship between two variables (independent or dependent).
The production function expresses the quantitative relationship between production and the means that contribute in production.
There are various assumptions of production function. Like, the level of technical knowledge should not change, the prices of means of production should remain the same, the time period should be definite, combination of factors of production can be changed to an extent only, the most efficient technique of production should be used, there should be uniformity in the means of production, the firm’s objective is to maximise production.
There are many characteristics of production function – it is an engineering concept, it is cost independent, it is related to a definite technique, it is a time-independent concept, it expresses a physical relationship between means and production, it accepts the substitution possibilities of means, it may be short term and long term, it is a subject of static economics.
Production function may be short term or long term according to the pre-conditions of the time period.
In short run, the change in production is as per the short run production function.
In short rim, the proportion of fixed and variable means keep on changing along with the change in production. On the contrary, in the long run, the proportions of the means remain unchanged.
In short-run production function, the state of technology remains constant.
In the long run, the state of technological change is flexible.
Short-run production function is related to the law of variable proportions.
Long-run production function is related to outcome/return of scale.
In the short-run production, labour is the variable means.
In the long-run production, all means are changeable.
Important Definitions
- In words of Alfa. C. Chiang, “Function is group of pairs of variables (dependent and independent) in a specific order with the speciality that for a specific value of x, the function determines a unique value of y.
- In words of Henderson and Quandt, “Production function is an engineering concept which explains the technical and quantitative relationship present in production, with the help of means of production and output. This relation is quantitave and with the given technology”.
- As per Dr Balwant Kandoi, “If quantity of production produced by a firm is Q when means of production like labour, capital, land, management and technique and courage or entrepreneurship (Ld, L, K, O) are used in production, then we will write the Production Function as:
Y = f (Ld, L, K, O)” - According to N Gregory Mankiw, “Production Function is the relationship between the quantity means of production and quantity of production function”.
Important Glossary
- Production : Production means an activity, by which resources (man, material, time, etc.) are transformed into a different and more useful commodity or service with added value.
- Function : Function implies the quantitative relationship found between two variables (independent and dependent).
- Input : The means (resources) used in the process of production are called input.
- Output: The quantity of production is called output.
- Production Function: Production function states the relationship between the physical quantities of inputs and outputs.
- Short Period : Short period is a duration of time in which it is not possible to change all the means of production.
- Long Period : Long period is a duration of time in which all means of production can be changed.