Production Function

Definition

A Production Function denotes an assumption about the response of production oriented economic activities to changing market circumstances (prices for goods and services). A well-known production function in the context of [Input-Output Model]] is the Leontief model, a linear model based on Leontief production functions and a given vector of final demand. The fundamental assumption is fixed input structures

Implicit assumptions are:

• Constant returns to scale
• Sectors use inputs in fixed proportions: Leontief production function