PRODUCTION
Producers have a production function and unlike consumers, their goal is to
maximize profits. (π= Revenue – Costs)
Production is any activity that creates present or future utility.
It is simple as the act of telling a joke…..
For this chapter we describe the production possibilities available to s for a
given state of technology and resource endowments.
How does output varies with the application of productive inputs in
both the short and long run?
Siyanda Zwane | UNIVERSITY OF CAPE TOWN
, THE INPUT-OUTPUT RELATIONSHIPS, OR PRODUCTION
FUNCTION
Among inputs into production, economists have traditionally included land,
labour, capital and entrepreneurship.
In the contemporary era, factors such as knowledge or technology,
organization and energy have been included….
Consider a production function that employs two inputs:
a) Capital (K)
b) Labour (L)
c) To produce meals (Q)
The relationship between K, L and Q may be expressed as:
Q = F(K, L)
F is a mathematical function that summarizes the process of
production which is how much of Q do we get when we employ
specific quantities of K and L.
Intermediate Products
Capital and Labour are clearly by themselves insufficient to produce meals.
Raw foodstuffs are also necessary….
For the sake of simplicity we will ignore intermediate products for this model
of production.
Siyanda Zwane | UNIVERSITY OF CAPE TOWN
, Fixed and Variable Inputs
The production function depicts how output varies if some or all of the inputs
are varied.
The long run for a particular production process is defined as the shortest
period of time required to alter the amounts of every inputs. ( No input stays
constant| every input changes/varies) (There is enough time for adjustment,
correction, or adaptation leading to the modification of production level, and as a
result, there are no fixed production factors)
The short run, by contrast, is defined as that period during one or more inputs
are fixed/constant/cannot be varied:
An input whose quantity can be altered in the short run I called a
variable input.
One whose quantity cannot be altered within a given time period s
called a fixed input.
Siyanda Zwane | UNIVERSITY OF CAPE TOWN
Producers have a production function and unlike consumers, their goal is to
maximize profits. (π= Revenue – Costs)
Production is any activity that creates present or future utility.
It is simple as the act of telling a joke…..
For this chapter we describe the production possibilities available to s for a
given state of technology and resource endowments.
How does output varies with the application of productive inputs in
both the short and long run?
Siyanda Zwane | UNIVERSITY OF CAPE TOWN
, THE INPUT-OUTPUT RELATIONSHIPS, OR PRODUCTION
FUNCTION
Among inputs into production, economists have traditionally included land,
labour, capital and entrepreneurship.
In the contemporary era, factors such as knowledge or technology,
organization and energy have been included….
Consider a production function that employs two inputs:
a) Capital (K)
b) Labour (L)
c) To produce meals (Q)
The relationship between K, L and Q may be expressed as:
Q = F(K, L)
F is a mathematical function that summarizes the process of
production which is how much of Q do we get when we employ
specific quantities of K and L.
Intermediate Products
Capital and Labour are clearly by themselves insufficient to produce meals.
Raw foodstuffs are also necessary….
For the sake of simplicity we will ignore intermediate products for this model
of production.
Siyanda Zwane | UNIVERSITY OF CAPE TOWN
, Fixed and Variable Inputs
The production function depicts how output varies if some or all of the inputs
are varied.
The long run for a particular production process is defined as the shortest
period of time required to alter the amounts of every inputs. ( No input stays
constant| every input changes/varies) (There is enough time for adjustment,
correction, or adaptation leading to the modification of production level, and as a
result, there are no fixed production factors)
The short run, by contrast, is defined as that period during one or more inputs
are fixed/constant/cannot be varied:
An input whose quantity can be altered in the short run I called a
variable input.
One whose quantity cannot be altered within a given time period s
called a fixed input.
Siyanda Zwane | UNIVERSITY OF CAPE TOWN
