In a fixed-proportions production function, both capital and labor must be increased in the same proportion at the same time to increase productivity. Examples of Fixed-Proportions Production Functions A fixed-proportions production function is a function in which the ratio of capital (K) to labor (L) does not fluctuate when productivity levels change. Production capital includes the equipment, facilities and infrastructure the business uses to create the final product, while production labor quantifies the number of man-hours needed to complete the process from start to finish. 35.Ī production function represents the mathematical relationship between a business's production inputs and its level of output. Macro-economic Theory: A Mathematical Treatment.
It was named after Wassily Leontief and represents a limiting case of the constant elasticity of substitution production function.įor the simple case of a good that is produced with two inputs, the function is of the form q = Min ( z 1 a, z 2 b ). In economics, the Leontief production function or fixed proportions production function is a production function that implies the factors of production will be used in fixed (technologically pre-determined) proportions, as there is no substitutability between factors.
Two input Leontief Production Function with isoquants
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