Elasticity of Production

The elasticity of production, also called the output elasticity, is the percentage change in production divided the percentage change in the quantity of an input used for that production. For example, if a firm increases the number of workers by 10%, and the number of products produced per month increases by 20%, the elasticity of production will be:

Elasticity of Production = 20% / 10% = 2

It is also called the partial output elasticity, because it refers to the change in the output when only one output change (that is, it’s the partial derivate of the production function, as opposed to the total derivative). If the production function has only one input, the elasticity of production measures the degree of returns to scale, but usually, production function has more than one input.

The elasticity of production is a measure of the responsiveness of the production function to the change in one input.

The quantity supplied depends on several factors. Some of the more important factors are the price of the good or service, the cost of the input and the technology of production.

output elasticity
Movement along the supply: when the price increases, the quantity supplied decreases

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