Production and Productivity

Production technology is analogous to the consumption technology. Thus, the production function, Q = Q (L, K) is analogous to the utility function, U = U (X, Y), where X and Y are usable goods; and L and K are usable Inputs. Just as X and Y can be combined in different proportion in consumption process, L and K can also be combined in different proportion in a proportion in a productive process. As such the concept of total average and marginal productivity stand in one to one, vector relationship to total, average and marginal utility.

At this stage, one must note that production has reference to physical volume or money value of output, where productivity has reference to output per unit of input. Productivity is a ratio; average productivity is a ratio of total output to total input; the marginal productivity is a ratio of incremental output to incremental input. In the same way, we talk of ‘total factor productivity’ or ‘partial factor productivity’ depending on whether we consider all one input at time.

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