The theory of production applied to the construction industry has been typically based on management theories, and the application of the economic theory of production is less common. The economic theory of production focuses on features of the demand for factors of production (inputs) and output of commodities to develop input and output functions. The issues involved on the input side are concerned with the technical constraint of production processes that determine the cost base, and on the output side with the structure of markets where prices and revenues are determined. This paper focuses on the input side. The purpose of the paper is to discuss properties of construction production technology in the context of the economic theory of production and the production function. The paper then discusses the role of technical progress and shifts in the production function due to the adoption of new techniques which affect the production process or change input/output relationships.
Theory of production, Productivity, Production function