Grain production depends on various inputs such as land, labor and capital that lead to production. As a producer, you will calculate the amount of land and labor or other factors needed to produce the given quantity of a commodity (grain). The production function helps us study the functional relationship between physical inputs and physical production of a commodity. It is purely a technical relationship that carries inputs and outputs of factors. Y=f(X1, X2) Y: maximum possible production of a commodity defined with respect to a given technical know-how. Over time, technical knowledge may improve accordingly. It may become possible to produce 15 units of output (instead of 10) with the same physical inputs. It is a situation of displacement of the production function. THE PRODUCTION FUNCTION IN THE SHORT RUN The short run is a period in which some factors are fixed and some factors are variable, which means that production can be increased by using more variable factors. For example L (labour) and K (capital), K is constant in the short run, production can only be increased by using more units L (labour)40x = f(5L, 4K)45x = f(6L, 4K)ie Production is increased from 40 to 45 units by increasing the variable L units from 5 to 6 and the K units remain constant at 4. The short run production function is also called the variable proportion functionLONG RUN PRODUCTION FUNCTIONLong period of time in which all factors are variable, meaning production can be increased by using a larger share of total output, while in the short run it is necessary to maintain a factor ratio as the best factor ratio to produce a commodity. In the short run it is not possible to maintain it because... in the middle of the paper... the factor together with the fixed factor beyond the point exceeds the limit of the ideal factor ratio. The result is poor coordination between fixed and variable factors. As a result, the law of diminishing returns comes into effect. RETURNS TO SCALE In the long run, all factors of production become variable, no factors fixed. In the long run all factors are variable. In this period the production of a commodity increases by increasing all the variable factors in the same proportion. Aspects of Returns to Scale The change in the behavior of the output When all inputs vary in constant proportion can show the three possibilities: (1) Increasing returns to scale (IRS)(2) Constant returns to scale (CRS)(3) Returns decreasing returns to scale (DRS)(1) Increasing returns to scale (IRS) Increasing returns to scale occur when a given percentage increases in all input factors CAUSES OF INCREASING RETURN TO SCALE