Production Theory 1
          ShortShort-RunRun vv. LongLong-RunRun
       FixedFixed input/factorinput/factor ofof production:production: quantityquantity 
        of input is fixed regardless of required 
        outputoutput levellevel, ee.gg. capitalcapital oror specializedspecialized 
        labour
       VariableVariable input/factorinput/factor ofof production:production: 
        quantity of input used depends on the 
        levellevel ofof outputoutput
       Short run: at least one input/factor is fixed
       LongLong run:run: allall inputs/factorsinputs/factors areare variablevariable
                   Production Function
        A technology is a process by which 
          inputs ()(e.g. labour and capital) are 
          converted into outpput.
        The output level is denoted by y.
        ThThe ttechhnollogy’’s prodtductiion ffunctition
          states the maximum amount of output 
          possible from an input bundle. 
                     yy  ff((xx ,, xx   ))
                               1        n
         ProductionProduction FunctionFunction
             One input
    Output Level      y = f(x) is the
                      pproductoductioon
      y’              function
               y’f’ = f((x’)’) isis thethe mamaxiimmumm 
               output level obtainable 
               fromfrom x’x’ inputinput unitsunits.
              x’         x
             Input Level