factors of production - inputs that firm uses to produce  

• mainly divided into labor, materials, capital
  • capital - not just money, but also equipment, buildings, machinery

production function - shows highest output for combo of inputs  

• Q = F(K,L)
  • K = capital, L = labor (materials left out of function for simplicity)
  • multiple combinations of K, L can produce any given Q
  • function will change w/ technology changes (allowing production to occure more efficiently)
• possible for firm to produce less than maximum efficiency, but function assumes that firm produces as much as possible
• inputs, outputs measured as flow variables (changing w/ time)

isoquant - like indifference curve, shows all input combos for a given output  

• certain amount of capital can replace labor, and vice versa
• isoquant map - several isoquants combined on a single graph, like an indifference map
• input flexibility - ability to choose different combinations, depending on their situation

short run vs long run - not based on a set amount of time

• different for each firm and situation
• short run - firm can only change a few of its inputs
  • firm can increase labor (add hours), buy more materials
  • machinery, other tools cannot be changed as quickly
  • always a fixed input (unchangeable) in place
• long run - firm can change all inputs
  • more time >> more flexibility