Wednesday, June 17, 2015

Production function and its properties

Production Function may be defined as the functional relationship between input (factors of production) and physical output. It shows the maximum amount of output that can be produced from a given  set of inputs in the existing state of technology. 
Input Firm Output
Production function can be expressed as
q = f(x1, x2,..., xn)
where q = quantity of output produced
(x1, x2,..., xn) = factor of production

Properties of Production function/Assumptions:
1. Production function is a single valued and continuous function with continuous first and second order partial derivative.
2. The production function is defined only for non-negative value of input and outputs.
3. The production function is normally assumed to be increasing with its domain.
4. It is strictly quasi-concave function when output is maximized or cost minimized and strictly concave function when profit is maximized.

 to be continued......

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