A production Function in general, without specifying what kind, is related to the output of a production process which starts which starts with the factors of production. The production functions are an integral part for explaining marginal products as well as allocative efficiency. There are different classifications for production functions, and what constitutes them, determined by the type of production. This article of the WIKI aims to focus on the Substitional production function, explaining what it is and means, as well as the limitational, doing the same. (1)
Factors of Production
The factors of production are the inputs in any production process. The completed goods are what result from the process, also often called raw and finished goods. The more factors of production are given as input the higher the number of completed goods will be, and of course the opposite is just as true. The typical factors of production are Land, Labor and capital goods. more recently Entrepeneurship has also been added as one of these factors. Understanding these is essential to understanding the two production functions which this WIKI article focuses on. (2)
Understanding what is meant by land is relatively simple. This comprises all of the natural resources that a particular producer has at their disposal. Most often this means immediate natural resources, like oil or the property on which the production facility is located. This can also include the water or ocean that is close to the facility. The factor of production called land most often comprises the natural and raw materials which are used in production and are at the disposal of the production facility.(2)
The "labor" factor of production is also often called the Labor force, and this already hints at what this factor is. The employees which work in the production facility, or are a part of the production process, are what is defined as the labor factor of production. What is important to note is that this can also include any technical knowledge or marketing knowledge. Since the labor would know this it is classified as part of its knowledge. In essence it is the phyiscal as well as mental effort that employees and workers put towards finishing the goods. (2)
Capital is the third classic factor of production, and while Land can be seen as where the production takes place, and labor as in who does the production the capital are the tools which are used for producing the goods and available at the production facility. These are other goods created by humans, for example a hammer or a drilling machine and even the actual building in which the production takes place is considered capital. these are as essential to the production facility as the land and labor.(2)
The newest and somewhat controversial representation of a form of a factor of production is the factor called "Entrepeneurship". This factor of production is seen as the idea...