The economics of production

This chapter explores the physical production process. 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 defined and explained. Next, the effect of time on production is investigated by defining the immediate, short, and long runs. The role of physical production relationships is highlighted, with definitions for constant, increasing, and decreasing returns. Technological change and the law of diminishing marginal returns are defined and explained to enhance understanding of examples from food and agriculture.