Productivity Essay

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Productivity Chris Elder Microeconomics Edward Sponseller April 23, 2012 Productivity I would like to pay attention to the so-called production function in this paper. First of all, I will define this term. In my opinion, one of the most appropriate definitions is the following. “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” (Production Function, 2012). Simply speaking, production function describes relations between a firm’s output and input. It claims that the final output depends on quantity of capital, labor and other resources. The second important factor is its combination. A typical production function is described on the following picture or graph. The current stage in the development of society and business vividly describes characteristics of a production function. I mean that capital is becoming more important factor of production and is replacing labor. Technological development has become the main driver of progress and business in today’s industry. Businesses can use more effective technologies than labor force. On the other hand, people can increase their professionalism and qualifications, saving time that was needed to perform unqualified work that is now performed by machines. Thus, generally we can treat this process as a positive one. Even the simple art of farming, farmers must pay attention to the economic factors. Marginal and average costs (average total costs) help the farmer to calculate the maximum efficiency of production. By breaking down the farmers cost to fixed and variable inputs the farmer is able to make choices of how to spend his capitol and increase his or her production function and can determine the marginal product of labor (Krugman, 2009).

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