The production function

When Henry ford first started producing automobiles, most of his employees were skilled crafts people. He could not hire workers to just "tighten bolts" on the assembly line because the parts thatwent into the early fords were not standardized. It took skill, time, and money to shape individual parts so that everything fit together.
But ford was an innovator. When he convinced his engineers tofind a way to produce standardized parts, the wildly succesful and inexpensive Model T was born. Ford´s mass-production factory system transformed the face of society and the structure of bussines. hechanged the production process from one that employed skilled workers using inexpensive tools and machines to one that conbined unskilled workers with expensive and specialized machines. Hisenginners saw that this was possible, and ford saw that it would be profitable. Today, human innovations and technological breakthroughs continue to reshape the world of work. breakthroughs incommunications, biotechnology, and other areas are repidly changing how we work.
As the first step in analyzing production, we introduce a production function. A production function describes the conection betweenthe factors of production and output. Traditional economics recognizes four broad categories or factors of production: land (or natural resources), labor, capital, and entrepreneurship. The factorsof production are inputs into the production process. The owner of a firm, the entrepreneur, takes his or her idea, uses technology to combine the other factors of production, and produces a good orservice to sell in the market. Therefore, a production function is just a statement, a kind of shorthand, of the relationship between the inputs and output. To make the production function manageable,we focus on capital, the plants and equipment used to make goods and services, and labor. Labor consists of the human beings that produce the good or service. Entrepreneurship and natural resources...