chapter  2
28 Pages

The economics of production

This chapter explores the physical production process. That is, it describes the physical relationship between inputs and outputs, and describes the economics of transforming inputs into products; resources into goods. The production function is defi ned and explained. Next, the effect of time on production is investigated by defi ning the immediate, short, and long runs. The role of physical production relationships is highlighted, with defi nitions for constant, increasing, and decreasing returns. Technological change and the law of diminishing marginal returns are used to enhance understanding of examples from food and agriculture.