Production Function
Definition
A production function is a mathematical representation that shows the relationship between inputs (such as labor and capital) and outputs (such as goods or services) produced by a firm. It demonstrates how much output can be produced with different combinations of inputs.
Analogy
Think of a production function like a recipe for baking cookies. The ingredients you use (inputs) such as flour, sugar, and butter, combined with the baking process, determine the number of cookies you can produce (output). Changing the amounts of ingredients will affect the quantity of cookies you can make.
Related terms
Total Product: Total product refers to the total amount of output produced by a firm using all available inputs in a given period.
Marginal Product: Marginal product represents the additional output that is generated when one more unit of input is added while keeping other inputs constant.
Average Product: Average product is calculated by dividing total product by the quantity of input used. It measures the average amount of output per unit of input.
"Production Function" appears in:
Resources
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.