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Department of Economics

  

The short-run production function diagram

The short run is defined as the period during which at least  one of the inputs is fixed.  According to the following short-run production function, labour is the only variable input  while the rest of the inputs are regarded as fixed. 

Y = F(N,...)

As more labour is employed the total product (TP or Y) increases until a maximum is reached and then it begins to decline.

Three ranges can be distinguished:

  • a range where the total product increases at an increasing rate;
  • a range where the total product increases at a diminishing rate;
  • a range where total product is unchanged and then begins to decline.
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A production function shows the relationship between the quantity of inputs and the maximum output that can be produced with these inputs within a given time period using a given technology. In the short run all inputs are variable.
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