Microeconomics (Production, Ch 6) 6.1 THE TECHNOLOGY OF PRODUCTION The Production Function factors of production Inputs into the production process (e.g., labor, capital, and materials). Download full-text PDF. theory production costs micro economoics finance business etc. In economics, production theory explains the principles in which the business has to take decisions on how much of each commodity it sells and how much it produces and also how much of raw material ie., fixed capital and labor it employs and how much it will use. There are 3 types of Returns to Scale: Constant Returns to Scale Increasing Returns to Scale With increase all inputs together (scale of 1. • Law states that “As we Increase the Quantity of It is usually expressed as an annual change of output as a result of change of all inputs change by same proportion. For example, f :