Production Function

Definition

A production function is a mathematical representation that shows the relationship between inputs (such as labor and capital) and outputs (such as goods or services) produced by a firm. It demonstrates how much output can be produced with different combinations of inputs.

Related terms

Total Product: Total product refers to the total amount of output produced by a firm using all available inputs in a given period.

Marginal Product: Marginal product represents the additional output that is generated when one more unit of input is added while keeping other inputs constant.

Average Product: Average product is calculated by dividing total product by the quantity of input used. It measures the average amount of output per unit of input.