Saturday, August 4, 2018

Production Function

Production function shows the maximum amount of output which can be obtained from a given amount of inputs.
Q=K+L
Where
Q is the quantity of output
K is the amount of capital
L is labour used in production
In short run which refers to a short period of time, only labour inputs can be changed. If 100 units is to be produced and there is only 70 units of capital and 20 labours,where capital cannot be changed but labour can be increased from 20 to 30.
In the long run which refers to a long period, both capital and labour can be changed
When 100 units is to be produced both capital and labour can be increased to meet 100 units

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