A Business Encyclopedia

Linear Homogeneous Production Function

Definition: The Linear Homogeneous Production Function implies that with the proportionate change in all the factors of production, the output also increases in the same proportion. Such as, if the input factors are doubled the output also gets doubled. This is also known as constant returns to a scale.

The production function is said to be homogeneous when the elasticity of substitution is equal to one. The linear homogeneous production function can be used in the empirical studies because it can be handled wisely. That is why it is widely used in linear programming and input-output analysis. This production function can be shown symbolically:

nP = f(nK, nL)

Where, n = number of times
nP = number of times the output is increased
nK= number of times the capital is increased
nL = number of times the labor is increased

Thus, with the increase in labor and capital by ā€œnā€ times the output also increases in the same proportion. The concept of linear homogeneous production function can be further comprehended through the illustration given below:

Linear Homogeneous production functionIn the case of a linear homogeneous production function, the expansion is always a straight line through the origin, as shown in the figure. This means that the proportions between the factors used will always be the same irrespective of the output levels, provided the factor prices remains constant.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

substitutability economics definitionindifferences definitionvrooms motivational theorycauses of channel conflict in marketingdescriptions of ethical theories and principleshorizontal and vertical marketingtypes of poison pillsconvertable debenturesexplain liquidationwhat's internship meandifferent types of amalgamationretained incomekarizma definitionhindrances to effective communicationcoreationherzberg s theoryhierarchy meaning in urduherzberg's motivationethnocentrism defdifferent types of arbitragewhat does ethnocentric meanadministrative principles henri fayolwhat is the definition of neoclassicalorganizational theoristsretention urdu meaningreorder definitionjob rotation and job enlargementperpetual dividend growth modelqueuing definemeaning of revitalisedconsumer sovereignty definition economicsretained earnings definedivested meansprovident definitionleadership style participativedefinition of environmental auditpaired comparison techniquehow to find a stratified samplemodigliani definitioncorrelation scatter graphpopulation proportion definitionformula of asset turnoverdegationautocratic leadership stylecaptive pricing examplescpm techniquemeaning of hrmisoquant propertiesideal self definitionturnover accounting formulawhat is johari window in communicationpropounded meaningclassical and neoclassical theoriesstructural unemployment definition economicsrationing meanspath goal model of leadershipresourcing definitionlaisser meaninggeocentricity definitionwhich of the following is a unique feature of oligopolygeocentric definitionwhat is pfrda pension schemepearson coefficient formulaunitary price elasticity of demand curveflanker brand strategyapprenticeship definedefinition of laissez faire leaderequity theory definitionexplain utility theoryego definition psychologymeaning of flankcognitive theory of learning definitionprice elasticity of demand diagramproduct mix examples in marketing