![]() Total Output/ Total Product: The short run production function gives the total (maximum) output obtainable from different amounts of the variable input given a specified amount of the fixed input. Q = f( L, K, N, O) where L is labour, K is capital, N is land and O is organization when the firm uses each combination of inputs as effectively as possible. In other words, production functions describe what is technically feasible when the firm operates efficiently i.e. Production Function: A production function is a mathematical equation showing the maximum amount of output that can be produced from any specified set of inputs given the existing technology. Suppose while baking a cake we need 1 cup milk and 2 cups flour and so, we will need 2 cups of milk and 4 cups of flour to prepare 2 cakes. ![]() If output is expanded or contracted, all inputs must be expanded or contracted so as to maintain the fixed input ratio. ![]() On the other hand, fixed proportions production means there is one and only ratio of inputs that can be used to produce a product. This may apply only to the long run but it is relevant to the short run when there is more than one variable input. Secondly, when production is subject to variable proportions, the same output can be produced by various combinations of inputs – i.e. Naturally as the amount of one input is changed the other remaining constant, the ratio of inputs changes too. Usually long run represents the scenario when firms decide to expand the scale of operations or branch out into new products.įixed vs Variable proportions : variable proportion production implies that output can be changed in the short run by changing the amount of variable inputs used in co-operation with the fixed inputs. Long run : Long run production corresponds to the time that is needed to make all production inputs variable. Short run: In a short run the quantities of one or more factors of production cannot be changed. Example can be labour hours.Ĭorresponding to fixed and variable inputs economists also introduced two other concepts on short and long run. Variable inputs: A variable input is the one whose quantity can be changed almost instantaneously in response to desired changes in output. Although no input is ever absolutely fixed but frequently for analytical simplicity we hold some inputs fixed. Additionally, we can categorize the factors of production as variable inputs and fixed inputs.įixed inputs: A fixed input is defined as one whose quantity cannot be readily changed when market conditions indicate that an immediate change in output is desirable. The productivity of each input at different input levels and ratios.įactors of production: There are four factors of production – Land, Labour, Capital and Organization. ![]()
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