Business, Legal & Accounting Glossary
Output means produce in economics terminology. Volume, rate of growth, composition and distribution of the output of a nation are indicators of its growth and development. The transition of inputs into outputs is explained by the concept of the production function in economics. Production function differs on a variety of technology used. Output can be capital intensive or labour intensive depending on the technology used, availability of factors of production to name a few. A related concept is the concept of output gap. Aggregate output in economics refers to the gross value of all commodities and services manufactured in a country. Aggregate output is also alternatively known as aggregate supply.
The production function is a technical relationship between inputs and outputs. Inputs in the production process are normally capital and labour. A linear production function with a single input, usually labour is the simplest form of the production function.
Suppose a single representative worker/labourer can produce 200 pizza per day. Here production function is described as follows.
Q= 200 L
Where Q = output
L= labor
A realistic production function incorporates diminishing returns to the factor of production (here labour). Multifactor production functions are more in use in economic modelling. The Cobb-Douglas production function is a well-known production function in economics.
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This glossary post was last updated: 29th March, 2020 | 0 Views.