Production function

A mathematical relationship describing the maximum output a firm or economy can produce from specified quantities of inputs, given its technology.

Factors of production: Resources such as labor, capital, land, and materials used to produce goods and services. These are the inputs whose quantities appear in a production function.
Cobb–Douglas production function: A production function in which output is a constant multiple of inputs raised to constant powers. Its exponents summarize input elasticities and determine returns to scale.
Cost function: The minimum expenditure required to produce a specified output at given input prices. It is derived by choosing the least-cost input bundle permitted by the function.
Production possibility frontier: A curve showing the maximum combinations of two outputs an economy can produce with available resources and technology. It represents limits across multiple outputs, unlike a single-output input relationship.
Production possibility set: The combinations of inputs and outputs that are technologically feasible for a production process. Its boundary identifies the maximum output represented by the function.
Leontief production function: A production function with fixed input proportions, where extra amounts of one input alone do not raise output. It represents technologies with no substitution between required inputs.
Total factor productivity: The portion of output growth not accounted for by measured changes in labor and capital inputs. It captures shifts in output that input quantities alone cannot explain.
Utility function: A mathematical representation of how a consumer ranks alternative bundles of goods. It models preferences over outputs rather than the technology that produces them.
Marginal product: The additional output generated by increasing one input while holding other inputs fixed. It measures how the function changes as an input quantity rises.
CES production function: A production function with constant elasticity of substitution between inputs. Its parameter directly controls how readily one input can replace another.

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