Production Function

Production Function for a business typically focuses on the physical and so does not take into account non physical aspects of production like prices. It is one of the key concepts of mainstream neoclassical theories, used to define marginal product and to distinguish allocative efficiency, the defining focus of economics. 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. Production function also gives information about increasing or decreasing returns to scale and the marginal products of labor and capital.