What Is a Production Function?
The production function can be represented by a mathematical model, chart or graph. "Production" is a universal concept in economics. "Production" in the sense of economics does not just mean checking a machine tool or weaving a piece of cloth. It also includes various other economic Activities, such as operating a shop or securities company's taxi passenger services, litigating for others, performing in a troupe, seeing a patient, etc. These activities all involve providing and receiving a product or service for a person or economic entity. Therefore, "production" is not limited to the production of physical products, but also includes various service activities such as finance, trade, transportation, and family services. [1]
Production Function
- In other words, it is the relationship between input and output under certain technical conditions. When dealing with actual economic problems, the production function not only represents the correspondence between input and output, but also a constraint of production technology. For example, when considering the problem of cost minimization, technical constraints must be considered, and this constraint is given by the production function. In addition, in
- 1. Production
- From an economic point of view, the meaning of the place of production is very broad. It does not just mean that a machine is manufactured or some steel is produced. It also includes a variety of
- 1.The production function reflects the difference between input and output under the given production technology conditions.
- The production function is divided into a variable input production function and a plurality of variable input production functions.
- 1.A variable input production function
- For a given product, the relationship between constant technical conditions, fixed inputs (usually capital), a variable input (usually labor), and the maximum output that can be produced is often called the short-term production function.
- 1. Fixed substitution proportional production function
- The fixed substitution ratio production function means that the substitution ratio between any two factors is fixed at each output level.
- The general form of the function is Q = aL + bK, where Q is the output, L and K represent labor and capital, and the constants a and b> 0.
- Fixed substitution ratio production function [2]
- 2. Fixed input proportional production function (also known as Leontieff production function)
- Schematic diagram of common production functions
- Fixed input ratio production function
- The general form of the function is Q = min {cL, dK}, where Q is the output, L and K represent labor and capital, and the constants c and d> 0 are the production technology coefficients of labor and capital, respectively. The fixed amount of labor and capital required for a unit of product.
- [2]
- 3.Cobb-Douglas production function
- The Cobb-Douglas production function was proposed by the mathematician CWCobb and the economist Paul H. Douglas in the 1930s. The Cobb-Douglas production function is considered to be a very useful production function because, in its simple form, it has some properties that economists care about, and it has certain significance in the analysis and application of economic theory.
- The general form of the function is Q = AL ^ K ^ , where A, , are three parameters, and 0 <, <1. and represent the relative importance of labor and capital in production, respectively. [2] is the share of labor income in total output, and is the share of capital in total output.
- Elasticity of substitution for different production functions: infinite for complete substitution (linear); 0 for fixed ratios; 1 for Cobb-Douglas. [3]