Wednesday, August 5, 2015

Output elasticity

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Output elasticity (w) is the proportionate rate of change in output due to change in input.
i.e w1  δ(lnq)/δ(lnx
=  (δq/q)/(δx1/x)
= (δq/δx1)/(q/x
= MP/AP

w> 1 when MP > AP
w= 1 when MP = AP
 w<1 when MP < AP

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