PRODUCTION FUNCTION: A PHYSICAL INPUT-OUTPUT RELATIONSHIP

  1. Short-run production function: some inputs fixed

  2. Assume just 2 inputs for simplicity (not reality)
    - One fixed input (often called "capital")
    - One variable input (often called "labor")

  3. But every production relationship has a production function! Such as nitrogen fertilizer and irrigation water as inputs to the output of grain sorghum (measured in yield/acre). Can you think of other inputs used in the grain sorghum production function?

  4. Emphasis: for our purposes, in the short run, a single variable input, a single output.

  5. Note the S-shaped curve used to depict the short-run production function

  6. This S-shaped curve reflects "increasing returns to the variable factor of production (‘input") and diminishing returns to the variable factor of production. Note the famous "Law of Diminishing Returns" ["returns" = output = product for your vocabulary list]

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