## Neoclassical Theory of Production

Neoclassical theory of production is a branch of economics that studies the relationship between the production of goods and services, and the factors of production. The theory is based on the idea that the production of a good or service is a function of the quantity of inputs used in its production. It is also known as the neoclassical theory of production, or the neoclassical production function. The theory was developed by Alfred Marshall and other economists in the late 19th century.

## Inputs in Neoclassical Theory of Production

Neoclassical theory of production states that the quantity of output produced is a function of the quantity of inputs used in its production. The inputs in the production process can be divided into two categories: capital and labour. Capital refers to physical capital such as machines, tools, and buildings, while labour refers to the human labour used in the production process.

## Production Function

The neoclassical theory of production states that the quantity of output produced is a function of the quantity of inputs used in its production. This is known as the production function. The production function is a mathematical equation used to describe the relationship between the inputs and the output. The equation states that the quantity of output produced is equal to the sum of the inputs multiplied by their respective productivity rates.

## Marginal Productivity Theory

Marginal productivity theory is an extension of the neoclassical theory of production. It states that the quantity of output produced is a function of the quantity of each input used in its production. The marginal productivity of each input is equal to the change in output divided by the change in the quantity of the input. The marginal productivity of each input is a measure of its contribution to the production of the output.

## Related Questions

• What is the relationship between the production of goods and services and the factors of production?
• What are the inputs in the production process?
• What is the production function?
• What is marginal productivity theory?
• What is the marginal productivity of each input?
• What is the neoclassical theory of production?
• What is the difference between neoclassical theory of production and marginal productivity theory?
• How does the neoclassical theory of production explain the relationship between inputs and output?
• What are the implications of the neoclassical theory of production?
• What are the limitations of the neoclassical theory of production?