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.
The mathematical formula is where x represents the inputs and Q, the output.
Famous quotes containing the words output and/or elasticity:
“Lizzie Borden took an axe
And gave her mother forty whacks;
When she saw what she had done,
She gave her father forty-one.”
—Anonymous. Late 19th century ballad.
The quatrain refers to the famous case of Lizzie Borden, tried for the murder of her father and stepmother on Aug. 4, 1892, in Fall River, Massachusetts. Though she was found innocent, there were many who contested the verdict, occasioning a prodigious output of articles and books, including, most recently, Frank Spiering’s Lizzie (1985)
“One of the reforms to be carried out during the incoming administration is a change in our monetary and banking laws, so as to secure greater elasticity in the forms of currency available for trade and to prevent the limitations of law from operating to increase the embarrassment of a financial panic.”
—William Howard Taft (1857–1930)