economics terms

Production Function

The production function relates the output of a firm to the amount of inputs, typically capital and labor.

It is important to keep in mind that the production function describes technology, not economic behavior.  A firm may maximize its profits given its production function, but generally takes the production function as a given element of that problem.  (In specialized long-run models, the firm may choose its capital investments to choose among production technologies.)

The EconModel application The Demand for Labor emphasize the role of the production function and marginal product in determining the profit-maximizing demand for labor.

Classic Economic Models
   Interactive presentations of the most important models
   in microeconomics and macroeconomics go beyond
   anything appearing in a printed-on-paper textbook.
   Learn to think like an economist. 

Classic Economic Models

Economics Terms

Arbitrage Pricing
Arbitrage Profit
Average Cost
Balance of Payments
Budget Constraint
Call Option
Concave Function
Consumer Surplus
Consumption Function
Convex Function
Deadweight Loss
Demand Curve
Economic Agent
Economic Model
Economics Textbook
Endogenous Technical Change
Exchange Rate
Expectations Hypothesis
Federal Funds (Fed Funds) Rate
Fixed Exchange Rate
Floating Exchange Rate
Frictional Unemployment
Gross Domestic Product (GDP)
Income Effect
Income Elasticity
Indifference Curve
Interest Rate
Intertemporal Substitution
Jensen's Inequality
Marginal Cost
Marginal Product
Marginal Utility
Optimizing Behavior
Perfect Competition
Phillips Curve
Price Elasticity
Producer Surplus
Production Function
Production Possibility Frontier
Put Option
Reservation Wage Rate
Risk Aversion
Structural Unemployment
Substitution Effect
Supply Curve
Taylor Rule
Technological Growth
Term Structure
Theory of the Consumer
Theory of the Firm
Unemployment Rate
Utility Function
Velocity of Money
Yield Curve