List the Managerial uses of production function other than those given in Managerial Uses of Production Function.
The production function refers to the representation of the functional and technological relationship between inputs and outputs of a product. And the production process of the firms generally permits a variation in the proportion in which the inputs are used. It helps in the understanding and calculation of the total, marginal and average products.
Even though the production function may be treated as abstract and unrealistic however, it provides logical and useful analysis. With the help of the production function the various stages of production’ may be understood appropriately based on the behavior of marginal and average products. The understanding of the law of diminishing marginal returns theory is also based on the understanding of the production function. As it specifies the maximum output which can be produced with a given set of inputs.
It helps in understanding the fact that with the decrease in the price of a factor of production and an increase in the other, the substitution effect comes into picture, as the former substitutes the latter. It is the principle of the production function that the managers tend to make full use of by increasing the returns from the expenditure. In other words, it can be said that it is very important for the manager to have a clear understanding of the production functions so that he is able to maximize the profits with the help of optimizing the input-output combination for a given cost. It is the manager’s responsibility to choose the best possible alternative amongst the set of alternative available with him.
The production function also helps the managers in deciding the process for obtaining a given output from the minimum combination of inputs. With the introduction of the computers, managerial decision-making relating with complex production functions has been enhanced.