economics Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interac ...

, 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 In economics, the concept of returns to scale arises in the context of a firm's production function. It explains the long-run linkage of increase in output (production) relative to associated increases in the inputs (factors of production). In th ...

. 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. A different usage of the term "output elasticity" is defined as the percentage change in output per one percent change in ''all'' the inputs.Hirschey (2003) p. 238. The coefficient of output elasticity can be used to estimate returns to scale. The mathematical formula is:

E_Q = \dfrac

where x represents the inputs and Q, the output. Multi-input-multi-output generalisations also exist in the literature.

References

Elasticity (economics) Macroeconomic indicators {{Econ-stub

See also

References