3. Explain Production Function. How Is It Useful For Business?


1 Answers

Anonymous Profile
Anonymous answered
Production is an activity, which transforms the input into output. A car
manufacturer will need labour and machinery (input) to manufacture car.
Production function is the technical relationship between input and output.
Production function expresses the relationship between quantity of output
produced and quantity of input required. In real life, any commodity is
produced by various inputs and with different methods of production. But
here, to express production function, we consider a single production
process which utilizes two inputs, labour and capital. Therefore, production
function is algebraically expressed as

It says that the output Q is the function of input L and K.
Production function is studied in four ways.
1. Law of variable proportion
2. Returns to scale
3. Economies of scale
4. Economies of scope

Answer Question