Meaning of Product Function
Meaning of product Function
Production function may be defined as the functional relationship between physical inputs (i.e., factors of production) and physical outputs, i.e., the quantity of goods produced. .
Thus, the production function expresses the relationship between quantity of output and the quantities of various inputs used in production. The physical relationship between firms’ physical input and output depends on a given slate of technological knowledge.
Like demand, production function refers to a period of time. Accordingly, it refers to a flow of inputs resulting in a flow of outputs over a period of time, leaving prices aside.
It shows the maximum amount of output that can be produced from a given set of inputs in the existing state of technology. The output will change when the quantity of any input is changed or the minimum quantities of various inputs required to produce a given quantity.
In real life, a manufacturer wants to know how much of the various factors or inputs, viz., land (i.e., natural resources), labor and capital will be required to produce a unit or given quantity of a commodity during a given period of lime. Itis necessary for him to know this so that he may be able not only to assess his requirements of productive services but also roughly to estimate the probable cost. 11 will thus indicate the varieties of the productive resources and their possible combinations used for the purposes of production.
Production function can be expressed as under:
x = f(a,b,c,d)
Here X is the output of a commodity per unit of time and a.b.c.d are the various productive resources which go into the making of the quantity of the commodity; f is function, i.e., varying with.
Choice of Production Function
Every management has to make a choice of the production function depending not only on industrial knowledge and the prices of the various factors of production but also on its own capacity to manage. It has also to select the various factors and knit them together in economical combinations. These two choices are interlinked. The overriding consideration is to seek a combination which gives the minimum average cost and maximum aggregate profit.