What is production? on what basis are factors of production classified?

Production refers to the transformation of inputs (raw material, labour, types of machinery, etc) into output, which can fulfil the expectations or desires of the consumer.

Production function refers to the technical relationship between inputs applied and outputs produced in an economy.

Certain terms related to production function are:

• Total Product: abbreviated as TP, refers to a certain amount of output produced by a certain unit of labour.
• Average Product: abbreviated as AP refers to the quantity of output produced per unit of applied labour.
• Marginal Product: abbreviated as MP refers to any change in the total product due to a change in one extra unit of labour.

Understanding the span of time for the production process:

• Short-run: refers to the time period in the production process, where some factors of production are fixed. For example, the labour or the raw material is a variable factor and remains variable, but machinery or the factory is fixed in this case.
• Long run: refers to the time period in the production process when all factors of production are variable. For example here in this case even the machinery or the factory is a variable one, as after some extent of use the machines need to be changed or the factories production line needs modern updates.

Factors of production are classified based on their usability:

• Fixed factors: it refers to those factors of production which remain fixed with increased output in the short run. For example, machinery, or the factory premises that don't get over with every unit produced but depreciate. Thus they are fixed.
• Variable factors: it refers to those factors of production which get used up in the production process. For example raw material, labour, etc. Here the raw materials are in use to manufacture the usable output, and the labour induced is variable as it changes with an increase in output.