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en:elasticity-of-production [2018/04/19 11:00]
141.0.13.206 [Example: Elasticity of Production of a Cobb Douglas Production Function]
en:elasticity-of-production [2019/02/06 07:52]
federico [Elasticity of Production]
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 The elasticity of production, also called **output elasticity**,​ is the percentaje change in the production of a good by a firm, divided the percentage change in an input used for the production of that good, for example, labor or capital. The elasticity of production, also called **output elasticity**,​ is the percentaje change in the production of a good by a firm, divided the percentage change in an input used for the production of that good, for example, labor or capital.
  
-The elasticity of production shows the **responsiveness** of the output when there is a change in one input. ​+The elasticity of production shows the **responsiveness** of the output when there is a change in one input.
  
-It is defined as de proportional change in the product, divided the proportional change in the quantity of an input. ​+It is defined as de proportional change in the product, divided the proportional change in the quantity of an input.
  
 **For example**, if a factory employs 10 people, and produces 100 chairs per day. If the number of people employed in the factory increases to 12, that is, a 20% increase, and the number of chairs produced per day increases to 110 (that is, a 10% increase), the elasticity of production is: **For example**, if a factory employs 10 people, and produces 100 chairs per day. If the number of people employed in the factory increases to 12, that is, a 20% increase, and the number of chairs produced per day increases to 110 (that is, a 10% increase), the elasticity of production is:
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 **ΔQ/Q / ΔL/L** = 10/100 / 2/10 = 0.1 / 0.2 = 0.5 **ΔQ/Q / ΔL/L** = 10/100 / 2/10 = 0.1 / 0.2 = 0.5
  
-If the production function contains only one input, the elasticity of production measures the degree of [[returns to scale]]. In this case: +If the production function contains only one input, the elasticity of production measures the degree of [[https://​www.econowiki.com/​doku.php?​id=en:​returns-to-scale|returns to scale]]. In this case:  
-- if the elasticity of production is 1, the production has constant ​return ​to scale, at that point. + 
-- if the elasticity of production is greater than one, the production has increasing returns to scale at that point. +- if the elasticity of production is 1, the production has **constant ​returns ​to scale**, at that point. ​ 
-- if the elasticity of production is less than one, the production has decreasing returns to scale at that point.+ 
 +- if the elasticity of production is greater than one, the production has **increasing returns to scale** at that point. ​ 
 + 
 +- if the elasticity of production is less than one, the production has **decreasing returns to scale** at that point. 
  
 ===== Using a production function ===== ===== Using a production function =====
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 \begin{equation} = α \end{equation} \begin{equation} = α \end{equation}
  
 +[[production-function-example]]
en/elasticity-of-production.txt · Last modified: 2019/02/06 07:52 by federico