The output of goods and services produced by businesses within a market
Short Run Production
At least one fixed factor input, usually the capital input such as plants and machinery and the stock of building and technology
Output of a business expands when more variable factors of production (e.g. labor, raw materials and components) are employed
Long Run Production
All of the factors of production can change
Business has the opportunity to increase the scale of its operations by adding extra labor and capital to the production process and introducing new technology
Productivity
How productive labor is
Marginal Product (MP)
Change in total output from adding one extra unit of labor
Average Product (AP)
Total output divided by the total units of labor employed
Production Stages
Units of labor employed
Total Product (TP)
Marginal Product (MP)
Average Product (AP)
Diminishing Returns
Occurs when the marginal product of labor starts to fall
Factors of production such as labor and capital inputs are not perfect substitute for each other
Fixed Costs
Costs that do not vary directly with the level of output
Variable Costs
Costs that vary directly with output, i.e. as production rises, a firm will face higher total variable costs because it needs to purchase extra resources to achieve an expansion of supply
