what is Production function.

Concept of production function: short run and long run.

Production function is the relation between of a firm's production (output) and the material factors of production (input).

Output needs inputs land labour and capital are the common inputs for the production of goods and services as a producer you should always be interested to know how much labour and capital on their inputs are required to produce a given quantity of a commodity. 

Fixed and variable factors

Factors of production are classified as:

(1) fixed factors and (2) variable factors.

Fixed factors are those the application of which does not change with the change in output. In fact fixed factor like machine are installed before output actually starts thus a machine is there even when output is zero.

Let us assume that machine can produce maximum 1000 units of commodity-x.

It means that for any change in output ranging between 0 - 1000 units, input of machine fixed factor remains constant.

Variable factors are those the application of which various are changes with the change in output. Labour is an example of a variable factor. We need more labour to produce more units of a commodity. Other things remaining constant. First use of a variable factor is zero when output is zero. It increases as output increases.

production function

Short run production function

Short run is a period of time when production can be increased only by increasing the application of variable factors. Fixed factor by definition remains constant. To elaborate further once a plant of a particular production capacity is installed, it cannot be changed during the short period. Short period is too short to change it. First production capacity as indicated by the plant size or the fixed factor remains constant during the short period.

Long run production function

Long run is a period of time when the distinction between fixed factor and variable factors vanishes. All factors are variable factors long period is long enough to increase production capacity of a firm. Plant size can be changed or more and more plants can be installed. Has what is fixed factor during the short period becomes the variable factor over the long period.

Returns to a factor: the law of variable proportions

Consider a situation when land is a fixed factor and labour is a variable factor and the farmer is producing wheat. Since land is a fixed factor he can produce more of weight only by using more and more labour.

Law of variable proportions

States that has more and more of variable factor is combined with the fixed factor, marginal product of the variable factor manually rises but eventually a situation must come when marginal product of the variable factor state declining. Marginal product mein ultimately become zero or even negative.

Causes of diminishing returns to a factor

Diminishing returns to a factor or the law of diminishing returns may be explained in terms of following factors.

(1) Fixity of the factors: Fixity of the factors is principal cause behind the law of diminishing returns. As more and more units of the variable factor are combined with the fixed factor, the letter cats excessively utilised. It suffers greater we are NTR and losses  its efficiency. Hence, the definition returns.

(2)Imperfect factor substitutability:

Factors of productions are imperfect substitute of each other. More and more of labour cannot be continuously used in place of capital. Accordingly diminishing returns are bound to set in if only the variable factor is increased to increase output.

(3) poor coordination between the factors:

Increasing application of the variable factor along with the fixed factor eventually disturbs the ideal factors ratio. This results in poor coordination between the fixed and variable factors. Hence ,the diminishing returns.

Assumption of the law

The law of variable proportion is based on certain assumption ,these are follow.

1. Ratio in which factors of production are combine can be changed.
2. Units of the variable factor are homogeneous or equally efficient, and are increased one by one. Has the law of diminishing returns sat in not because letter units of the variable factors are less efficient than the former once. It sets in because the ideal factor ratio is disturbed or because the availability of the fixed factor like machine reduce per unit of the variable factor.
3. State of technology does not change.

Postponement of the law

Postponement of the law of variable proportions the situation of diminishing MP is possible under two situation as under.

1. When there is improvement in technology used in the process of production. So that creator output is achieved with the same inputs.
2. When some substitute of the fixed factor is discovered. So that the constant of the fixed factor is removed. However such a situation is very rare, if not impossible.