production function, in economics, equation that expresses the relationship between the quantities of productive factors (such as labour and capital) used and the amount of product obtained. It states the amount of product that can be obtained from every combination of factors, assuming that the most efficient available methods of production are used.
It can be expressed in algebraical form as under: x =f (al, az, an)
This
equation tells us the quantity of the product X which can be produced by the
given quantities of inputs (lands labour, capital) that are used in the process
of production. Here, it may be noted that production function shows only the
maximum amount of outpLit which can be produced from given inputs. It is
because production function includes only efficient production process.
A
production indifference curve and its properties:
(1)
Indifference Curves are Negatively Sloped:
The indifference
curves must slope down from left to right. This means that an indifference
curve is negatively sloped.
In fig.
3.4 the two combinations of commodity cooking oil and commodity wheat is shown
by the points a and b on the same indifference curve. The consumer is indifferent
towards points a and b as they represent equal level of satisfaction.
(2) Higher
Indifference Curve Represents Higher Level:
A higher
indifference curve that lies above and to the right of another indifference
curve represents a higher level of satisfaction and combination on a lower
indifference curve yields a lower satisfaction.
In this
diagram (3.5) there are three indifference curves, IC1, IC2
and IC3 which represents different levels of satisfaction. The
indifference curve IC3 shows greater amount of satisfaction and it
contains more of both goods than IC2 and IC1 (IC3
> IC2 > IC1).
(3)
Indifference Curve are Convex to the Origin:
This is an
important property of indifference curves. They are convex to the origin (bowed
inward). This is equivalent to saying that as the consumer substitutes
commodity X for commodity Y, the marginal rate of substitution diminishes of X
for Y along an indifference curve.
(4)
Indifference Curve Cannot Intersect Each Other:
Given the
definition of indifference curve and the assumptions behind it, the
indifference curves cannot intersect each other. It is because at the point of
tangency, the higher curve will give as much as of the two commodities as is
given by the lower indifference curve. This is absurd and impossible.
In fig
3.7, two indifference curves are showing cutting each other at point B. The
combinations represented by points B and F given equal satisfaction to the
consumer because both lie on the same indifference curve IC2.
Similarly the combinations shows by points B and E on indifference curve IC1
give equal satisfaction top the consumer.
(5)
Indifference Curves do not Touch the Horizontal or Vertical Axis:
One of the basic
assumptions of indifference curves is that the consumer purchases combinations
of different commodities. He is not supposed to purchase only one commodity. In
that case indifference curve will touch one axis. This violates the basic
assumption of indifference curves.
