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Concept
Output (economics)
Summary
Output in economics is the "quantity (or quality) of goods or services produced in a given time period, by a firm, industry, or country", whether consumed or used for further production.
The concept of national output is essential in the field of macroeconomics. It is national output that makes a country rich, not large amounts of money.
Output is the result of an economic process that has used inputs to produce a product or service that is available for sale or use somewhere else.
Net output, sometimes called netput is a quantity, in the context of production, that is positive if the quantity is output by the production process and negative if it is an input to the production process.
The profit-maximizing output condition for producers equates the relative marginal cost of any two goods to the relative selling price of those goods; i.e.
One may also deduce the ratio of marginal costs as the slope of the production–possibility frontier, which would give the rate at which society can transform one good into another.
When a particular quantity of output is produced, an identical quantity of income is generated because the output belongs to someone. Thus we have the identity that output equals income (where an identity is an equation that is always true regardless of the values of any variables).
Output can be sub-divided into components based on whose demand has generated it – total consumption C by members of the public (including on imported goods) minus imported goods M (the difference being consumption of domestic output), spending G by the government, domestically produced goods X bought by foreigners, planned inventory accumulation Iplanned inven, unplanned inventory accumulation Iunplanned inven resulting from incorrect predictions of consumer and government demand, and fixed investment If on machinery and the like.
Likewise, income can be sub-divided according to the uses to which it is put – consumption spending, taxes T paid, and the portion of income neither taxed nor spent (saving S).
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Production (economics)
Production is the process of combining various inputs, both material (such as metal, wood, glass, or plastics) and immaterial (such as plans, or knowledge) in order to create output. Ideally this output will be a good or service which has value and contributes to the utility of individuals. The area of economics that focuses on production is called production theory, and it is closely related to the consumption (or consumer) theory of economics. The production process and output directly result from productively utilising the original inputs (or factors of production).
Cost-of-production theory of value
In economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. The cost can comprise any of the factors of production (including labor, capital, or land) and taxation. The theory makes the most sense under assumptions of constant returns to scale and the existence of just one non-produced factor of production. With these assumptions, minimal price theorem, a dual version of the so-called non-substitution theorem by Paul Samuelson, holds.
Economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables an increase in scale. At the basis of economies of scale, there may be technical, statistical, organizational or related factors to the degree of market control. This is just a partial description of the concept.