PRODUCTION INRODUCTION

Production refers to the transformation of inputs or resources into outputs of goods and services. So, it is the creation of goods and services from inputs or resources, such as labour, machinery and other capital equipment, land, raw materials, and so on, rather than referring merely to the physical transformation of inputs into outputs of goods and services.
Using production theory, decision makers determine how much of the variable input(s) to use in combination with the fixed input(s) to produce a particular level of output. By applying the concepts of production theory, the decision makers can determine the combination of inputs to use to produce a given amount of output at the lowest total cost. Production analysis also enables decision makers to understand the integrated nature of the firm the relationship among the various factors employed by the firm and among the functional units.
Decision makers make production decisions in two different decision-making time frames
? Short-run production decisions, and
? Long-run production decisions.
In short-run decision making situations, a decision maker must produce with at least one input that is fixed in quality. In a typical short-run situation, the decision maker has a fixed amount of plant and equipment with which to produce the firm’s output.
In long-run decision making concerns the usage of all inputs can be either increased or decreased. In the long-run, a decision maker can choose to operate in any size plant with any amount of capital equipment.
In conclusion, the short-run as the time period during which production actually takes place and the long-run as the planning horizon during which future production will take place.