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This concept is fundamental in the field of micro-and macroeconomic theory, so it makes sense to dwell on it before.
From a microeconomic perspective, the notion of the production function is easy. With this state of the art facilities use a variety of specific amounts of the various factors of production and reach certain levels of output. Each combination of factors of production corresponds to a particular result, and the large number of factors of production are consumed, the higher the level of output that is achieved.
Such a production function expresses the ratio between the number of technical factors of production used by entrepreneurs, and the number of resulting products. As a technical relation, this function can only be determined empirically by measurements based on actual figures.
Marginal product in finite factor of production values ​​expressed in the change in volume due to changes in production per unit amount of used production factor in the immutability of the others.
Each firm has a production function, which is usually different from the production functions of other firms. However, summing up the production functions of all existing in the economic system of firms; we find a common, which is called an aggregate production function.
In contrast to the microeconomic concept of a function of aggregate production function contains a number of significant difficulties of a theoretical nature, so that some economic schools in general have questioned its existence.
Assume that the construction of an aggregate production function, at least theoretically possible.
In such a function, obviously, must be present all the factors of production, which appear in at least one of the microeconomic production functions. However, in macroeconomic models adopted, as a rule, a simplified form of an aggregate production function, factors of production are grouped here into three broad categories: land, labor and capital.
The land includes all natural resources of the area (area cultivated, meteorological factors, etc.) work - all persons engaged in manufacturing and related; capital - any material resource, which is the result of the production and re-used for industrial purposes.
In many models, the land factor drops due to its low significance in the economic system characterized by high technological level and production function depends then only on two factors. Finally, in the short-term macro-economic models in the production function only variable factor is labor, because a short period - is a period of time during which the change in the amount of capital is so low that it can be ignored.