The Production Function
We have spoken of inputs like land and labor and outputs like wheat and toothpaste. But if you have a fixed amount of inputs, how much output can you get? In’ practice, the answer depends on the state of technology and engineering knowledge. On any day,
given the available technical knowledge, land, machinery, and so on, only. a certain quantity of tractors or toothpaste can be obtained from’ a given amount of labor. The relationship between the amount of input required and the amount of output that can be obtained is called the production function.
The production function specifies the maximum output that can be produced with a given quantity’ of inputs. It is defined for a given state of engineering and technical knowledge.
For example, we can imagine a book of technical specifications that shows the production function for generating electricity. On one page there are specifications for different-size gas turbines, showing their inputs (initial capital cost. fuel consumption, and the amount of labor needed to run the turbine) and their-outputs (amount of electricity generated). The next page includes descriptions of several sizes of coal-fired generating plants, showing inputs and outputs. Yet other pages describe nuclear power
plants, solar power stations, and so forth. Together ‘they constitute the production function for electricity generation.
Or consider the humble task of ditch digging. Outside our windows in America, we see a large and expensive tractor, driven by one person with another to supervise. This team can easily dig·a trench 5 feet deep and 50 feet,long in 2 hours. When we visit China, we see 50 laborers armed only with picks. The same trench might take an entire day, These two techniques-e-one very capital-intensive and the other highly labor-intensive-s-are part of the production function for ditch digging.
There are literately monitions of different production functions-one for each and every product or service. Most of them are not written down but are in people’s minds. In areas of the economy where technology is changing rapidly, like computer software
and biotechnology, production functions may become obsolete soon after they are used. And some, like the blueprints of a medical laboratory or cliff house are specially designed for a specific location and purpose and would be useless anywhere else.
Nevertheless, the concept of a production function is a useful way of describing the productive capabilities of a fine.
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