Production Function

1
Production Function

• A production function shows the functional
  relationship given by technology between a firms
  physical rates of input and its physical rates of
  output per unit of time.
• TPP f ( a, b, c, )

2
Characteristics of a Production Function

• Production refers to the transformation of inputs
  into output
• A production function is a flow concept
• A production function is a physical,
  technological, or engineering concept, and yet it
  has an economic dimension to it and
• In production analysis, factors of production can
  be separated into fixed and variable factors.

3
Value Relationships

• Total Value Product (TVP)
• TVP TPP P
• Marginal Value Product (MVP)
• MVP MPP P
• Marginal Revenue Product (MRP)
• MRP MPP MP
• Marginal Factor Cost (MFC)

4
Functional Relationships in Value Terms