Output elasticity
Encyclopedia
In economics
, output elasticity is the percentage change of output (GDP
or production of a single firm) divided by the percentage change of an input. It is sometimes called partial output elasticity to clarify that it refers to the change of only one input.
As with every elasticity
, this measure is defined locally, i.e. defined at a point.
If the production function contains only one input, then the output elasticity is also an indicator of the degree of returns to scale
. If the coefficient of output elasticity is greater than 1, then production is experiencing increasing returns to scale. If the coefficient is less than 1, then production is experiencing decreasing returns to scale. If the coefficient is 1, then production is experiencing constant returns to scale. Note that returns to scale may change as the level of production changes.
Output elasticity is defined as the percentage change in output per one percent change in all the inputs.The coefficient of output elasticity can be used to estimate returns to scale.
EQ = ∂Q/∂X x X/Q where X represents the inputs and Q, the output.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, output elasticity is the percentage change of output (GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
or production of a single firm) divided by the percentage change of an input. It is sometimes called partial output elasticity to clarify that it refers to the change of only one input.
As with every elasticity
Elasticity (economics)
In economics, elasticity is the measurement of how changing one economic variable affects others. For example:* "If I lower the price of my product, how much more will I sell?"* "If I raise the price, how much less will I sell?"...
, this measure is defined locally, i.e. defined at a point.
If the production function contains only one input, then the output elasticity is also an indicator of the degree of returns to scale
Returns to scale
In economics, returns to scale and economies of scale are related terms that describe what happens as the scale of production increases in the long run, when all input levels including physical capital usage are variable...
. If the coefficient of output elasticity is greater than 1, then production is experiencing increasing returns to scale. If the coefficient is less than 1, then production is experiencing decreasing returns to scale. If the coefficient is 1, then production is experiencing constant returns to scale. Note that returns to scale may change as the level of production changes.
Output elasticity is defined as the percentage change in output per one percent change in all the inputs.The coefficient of output elasticity can be used to estimate returns to scale.
EQ = ∂Q/∂X x X/Q where X represents the inputs and Q, the output.