INTRODUCTION

Production is basically an activity of transformation ,which

connects factor inputs & outputs.An input is defined as any good or service which contributes to the production of an output. Some of these inputs may be the outputs of other firms.for eg- steel is an input for an automobile producer and an output for the steel producer. In fact,production is an activity that increases consumer usability of goods & services

Meaning of production
In economics the term production means process by which

a commodity(or commodites) are transfered into a different usable commodity.In other words production means transforming input (labours,machines,raw materials) into an output. This kind of production is called manufacturing. The process of production may involve an intagible input to produce an intagible output.for e.g- in the production of legal,medical,social and consultancy services both input and output are intagible;lawyers,doctors,socialworkers,consultants, hairdressers,musicians,orchestra players are all engaged in producing intagible goods.. CONTD..>

 IN economic sense, production process may take a

variety of forms.for eg- transporting a commodity from one place to another where it can be used is production.. for eg- transporting man and material from one place to another is itself a productive activity: it produces service, storing a commodity for future sale or consumption is production. Wholesaling,retailing,packaging,assembling are all productive activities.These activities are just as good examples of production as manufacturing.

Production Function
A production function may take the form of a schedule

table , a graphed line or curve, an algebric equation or of a mathematical model . But each of these forms of a production function can be converted into the other forms.A real life production function is generally very complex it includes a wide range of inputs. The economists have however classified input as Land Labour Capital Raw material Time Space All these variables enter the actual production of a firm.

The algebric form of production function

To illustrate the form of production function,let us

suppose that a coal-miming firm employos only two inputs-CAPITAL(K) and labour (L )- in its coal production activity.As such the general form of its production may be algebrically expressed as, Q=f(k,L) Where Q= the quantity of coal produced per time unit,k=capital and L= labour. THE production function implies that quantity of coal produced,depends on the capital-k and labour-L, employed to produced coal .

Assumptions of production function

1- perfect divisibility of inputs and outputs; 2-limited substitution of one factor for the other; 3-constant technology;and 4-inelastic supply of fixed factors in the short run.
If there is a change in these assumptions the production function will have to be modified accordingly.

Production function with one variable input or law of variable proportions..

The law of diminishing returns being empirical in nature

,states that with a given state of technology if the quantity of one factor input is increased,by equal increments the quantities of the other factor inputs remaining fixed,the resulting increment of total product will first increase but decrease after a particular point. This law states that as we go on employing more of one factor of production other factor remaining the same,its marginal productivity will diminish after somepoint.For example ,if we employ more of labour,capital remaining the same ,the marginal productivity of labour will at first increase but start decreasing after reaching a high.

The operation of the law of variable proportion is subject to three assumptions:1-FIRSTLY,it is assumed that the state of technology is given. 2-SECONDLY , it is assumed that one factor of production must always be kept constant at a given level.Thus this law is not applicable when all the factor inputs are variable. 3-THIRDLY,this law is not applicable when the two inputs are used in fixed proportion.This amounts to say that the law is not applicable only to varying ratios between the two inputs

Production function with all variable inputs or return to scale

The law of production describes the technically possible

ways of increasing the level of output by changing all the factors of production,which is possible only in the long run.This is because in the long run all the factors of production are variable.The law of return to scale refer to the effect of scale relationships which implies that in the long run, output can be increased by changing all factor by the same proportion,or by different proportions.

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 Let us start with the initial level of production

function given by the equation Q0=f (k,L) And we increase all the factors of production by the same proportion p. We will clearly obtain a new level of output Q*,higher than the original level Q0, Q*= f(p,k,p,L)

Production function with two variable inputs or ISOQUANT

An ISOQUANT is the firms counter part of the consumers indifference curve.It is the locus of all the combinations of the factors of production labour(L) and capital (k) which yield a specified output level.For a defined output level the equation of the production becomes Q0=f(L,K) where, Q0 is a parameter. An isoquant is a curve showing all combinations of inputs that can be used to produce a given output.

Graph of ISOQUANT

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 A higher level of output is represented by a higher

ISOQUANT.If we assume that the marginal productivities of both the factors of production are positive and decreasing as more of them are used,the isoquant will be downward sloping and convex to origin.

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