Lesson 1: Definition of Production, Inputs and Outputs
Video lesson:
Competency (MLC)
Dear learner,
At the end of this lesson, you will be able to:
- Describe production
- Explain inputs and outputs
Brainstorming Question
- Think about a time when you participated in a production activity.
- What did you produce?
- What resources did you use?
Key Terms
- Production
- Input
- Output
- Production Function
- Service
The process of transforming inputs into outputs, such as goods or services.
Resources used in production, like labor, capital, and raw materials.
The final goods or services produced through the production process.
A mathematical representation showing the maximum output that can be produced from different combinations of inputs.
An intangible product that provides value, such as education or healthcare, without a physical form.
1.1 Production
Production is the process of transforming inputs (resources like labor, capital, and materials) into outputs (goods and services). For instance, when wheat is grown on land using seeds, labor, and machinery, this process is known as the production of wheat. Similarly, in a textile factory, the conversion of raw materials such as threads into finished cloth is also an example of production. Even services, like teaching or healthcare, are considered production in economics.
1.1.1 Production Function
The production function describes the maximum output that can be achieved from various combinations of inputs. It shows how different inputs can be combined to produce the most output possible. The production function is often represented mathematically as:
Q=f(X1,X2,X3,…,Xn)
Where:
- Q is the maximum output.
- X1,X2,X3,…,Xn are different types of inputs.
1.2 Inputs
Inputs are the resources used in production and are categorized into two main types:
Fixed Inputs
- These are inputs whose quantity cannot be changed during the production period. Examples include buildings and machinery.
Variable Inputs
- These are inputs that can be adjusted in quantity during the production period, such as labor and raw materials.
1.3 Outputs
Outputs are the results of the production process and can be classified into two types:
Tangible Outputs
- These are physical products that can be touched and seen, such as clothing, vehicles, or food.
Intangible Outputs
- These are non-physical products, such as services (e.g., education, healthcare, software) that cannot be physically touched but provide value.
Tangible products are typically physical goods like land, buildings, and equipment.
Intangible products include services like consulting, insurance, and education, which do not have a physical presence but are still valuable to consumers.