Production set

In economics a production vector is a representation of a manufacturing process by a vector containing an entry for every commodity in the economy. Outputs are represented by positive entries giving the quantities produced and inputs by negative entries giving the quantities consumed.

If the commodities in the economy are (labour,corn,flour,bread ) and a mill needs one unit of labour to produce 8 units of flour from 10 units of corn, then its production vector is (–1,–10,8,0). If it needs the same amount of labour to run at half capacity then the production vector (–1,–5,4,0) would also be operationally possible.

The set of all operationally possible production vectors is the mill’s production set.

If y is a production vector and p is the economy’s price vector, then p ·y is the value of net output. The mill’s owner will normally choose y from the production set to maximise this quantity.

See also

• Production–possibility frontier