<p>If you know Elasticity of average product you can identify how your output per worker or machine will change as $L$ or $K$ increases.</p>

<p>Recall the definition of elasticity is:</p>

<p>$$\mathcal{E}=\frac{\Delta y/y}{\Delta x/x}$$</p>

<p>average product of labor and capital:</p>

<p>$$AP_L=\frac{Q}{L}$$
$$AP_K=\frac{Q}{K}$$</p>

<p>therefore the elasticity of average product of labor and capital is:</p>

<p>$$\Gamma_L=\frac{\Delta AP/AP}{\Delta L/L}$$
$$\Gamma_K=\frac{\Delta AP/AP}{\Delta K/K}$$</p>

<p>This is useful for evaluating how existing worker or capital productivity will be impacted as a result of an increase in capital or labor.</p>

CC BY-SA 3.0
2017-11-06T05:41:56.533Z
2017-11-06T22:22:13.870Z
2017-11-06T22:22:13.870Z
EconJohn
<blockquote>
  <p>Companies with high elasticity ultimately compete with other businesses on price and are required to have a high volume of sales transactions to remain solvent. Firms that are inelastic, on the other hand, have products and services that are must-haves and enjoy the luxury of setting higher prices.</p>
</blockquote>

<p><a href="http://www.investopedia.com/terms/e/elasticity.asp" rel="nofollow noreferrer">Source</a></p>

CC BY-SA 3.0
2017-10-07T11:36:53.880Z
OP is not asking about demand elasticity of a luxury product. The tag shows he is interested in production function.
london
CC BY-SA 3.0
2017-10-07T11:39:11.190Z
@london The quote highlights high elasticity and low elasticity. It mentions that the company "has the luxury", not luxury products.
JoaoBotelho
CC BY-SA 3.0
2017-10-07T11:40:55.420Z
I think you are confusing the price elasticity of demand for luxury goods, as far as I can see, this comes form Investopedia. It defines the price elasticity of demand for goods.
london
CC BY-SA 3.0
2017-10-07T11:41:32.367Z
The OP is intersted in the elasticity of production with respect to inputs, so you should demonstrate your answer with an example of a production function. Please read.
london
CC BY-SA 3.0
2017-10-07T11:56:01.620Z
Why don't you submit your answer @london ? :)
JoaoBotelho
CC BY-SA 3.0
2017-10-07T12:01:12.273Z
The quote i posted mentions the benefits for companies (as in producers). If you go to the source there are functions and more to read. I think this is a place where you're free to submit the answers you want, and I didn't see a request to provide a production function. If you dislike my answer that's fine, but at least read it first and see if the content matches the question, not just the form. And of course, anyone who can do better is welcome to post!
JoaoBotelho
CC BY-SA 3.0
2017-10-07T12:14:37.520Z
I will post an answer tomorrow when I have time. As to your answer, I did not dislike it - it does not provide the answer the OP is seeking. It is up to the OP to dislike or not. I appreciate that anyone can provdie any answer here, and I am not opposing your views. Moreover, the link you provided takes me to Investopedia piece which explains the concept of Demand Elasticity. And, your quote come from a section entitled 'The Importance of Price Elasticity in Business'.
london
CC BY-SA 3.0
2017-10-08T03:44:51.873Z
My question is that what is the use of knowing elasticity of average product (or even output elasticity of inputs) to a producer. How can his decisions for production be influenced by these measures?
Shoaib Ashraf
CC BY-SA 3.0
2017-11-07T05:07:28.273Z
this doesn't seem like an answer.
EconJohn
CC BY-SA 3.0
2017-10-06T20:10:28.387Z
2017-10-06T20:10:28.387Z
JoaoBotelho
<p>Firstly they have given output elasticity of a factor, use of which is clear to me. It says to what degree my total output will vary due to a change in the quantity of a factor.
But what else do we get to know from elasticity of Average product?</p>

CC BY-SA 3.0
2017-10-03T06:24:20.443Z
Can you please explain the question a bit better? To me it's unclear what you are asking.
luchonacho
CC BY-SA 3.0
2017-10-03T08:01:32.300Z
Hi and welcome to the site! What elasticity do you mean? Take a look at this link and make your question a bit clearer on what exactly you dont understand: http://www.investopedia.com/terms/e/elasticity.asp
JoaoBotelho
CC BY-SA 3.0
2017-10-04T05:13:02.723Z
They've given output elasticity of inputs and then went on on to show how we can show elasticity of average product as output elasticity minus one. My question is what is the use of knowing all these for a producer.
Shoaib Ashraf
CC BY-SA 3.0
2017-11-07T04:08:50.723Z
does my answer help you?
EconJohn
<production-function>
What is the use of knowing elasticity of average product?
Shoaib Ashraf
# What is the use of knowing elasticity of average product?

(Asked by: username_0 on 2017-10-03)

Firstly they have given output elasticity of a factor, use of which is clear to me. It says to what degree my total output will vary due to a change in the quantity of a factor.
But what else do we get to know from elasticity of Average product?

**Tags:** production-function

> **Comments:**
> **username_1**: Can you please explain the question a bit better? To me it's unclear what you are asking.  
> **username_2**: Hi and welcome to the site! What elasticity do you mean? Take a look at this link and make your question a bit clearer on what exactly you dont understand: http://www.investopedia.com/terms/e/elasticity.asp  
> **username_0**: They've given output elasticity of inputs and then went on on to show how we can show elasticity of average product as output elasticity minus one. My question is what is the use of knowing all these for a producer.  
> **username_3**: does my answer help you?  

---

## 2 answers

### Answer by username_3 on 2017-11-06. Score: 1

If you know Elasticity of average product you can identify how your output per worker or machine will change as $L$ or $K$ increases.

Recall the definition of elasticity is:

$$\mathcal{E}=\frac{\Delta y/y}{\Delta x/x}$$

average product of labor and capital:

$$AP\_L=\frac{Q}{L}$$
$$AP\_K=\frac{Q}{K}$$

therefore the elasticity of average product of labor and capital is:

$$\Gamma\_L=\frac{\Delta AP/AP}{\Delta L/L}$$
$$\Gamma\_K=\frac{\Delta AP/AP}{\Delta K/K}$$

This is useful for evaluating how existing worker or capital productivity will be impacted as a result of an increase in capital or labor.


---

### Answer by username_2 on 2017-10-06. Score: 0

> Companies with high elasticity ultimately compete with other businesses on price and are required to have a high volume of sales transactions to remain solvent. Firms that are inelastic, on the other hand, have products and services that are must-haves and enjoy the luxury of setting higher prices.

[Source](http://www.investopedia.com/terms/e/elasticity.asp)

> **Comments:**
> **username_4**: OP is not asking about demand elasticity of a luxury product. The tag shows he is interested in production function.  
> **username_2**: @username_4 The quote highlights high elasticity and low elasticity. It mentions that the company "has the luxury", not luxury products.  
> **username_4**: I think you are confusing the price elasticity of demand for luxury goods, as far as I can see, this comes form Investopedia. It defines the price elasticity of demand for goods.  
> **username_4**: The OP is intersted in the elasticity of production with respect to inputs, so you should demonstrate your answer with an example of a production function. Please read.  
> **username_2**: Why don't you submit your answer @username_4 ? :)  
> **username_2**: The quote i posted mentions the benefits for companies (as in producers). If you go to the source there are functions and more to read. I think this is a place where you're free to submit the answers you want, and I didn't see a request to provide a production function. If you dislike my answer that's fine, but at least read it first and see if the content matches the question, not just the form. And of course, anyone who can do better is welcome to post!  
> **username_4**: I will post an answer tomorrow when I have time. As to your answer, I did not dislike it - it does not provide the answer the OP is seeking. It is up to the OP to dislike or not. I appreciate that anyone can provdie any answer here, and I am not opposing your views. Moreover, the link you provided takes me to Investopedia piece which explains the concept of Demand Elasticity. And, your quote come from a section entitled 'The Importance of Price Elasticity in Business'.  
> **username_0**: My question is that what is the use of knowing elasticity of average product (or even output elasticity of inputs) to a producer. How can his decisions for production be influenced by these measures?  
> **username_3**: this doesn't seem like an answer.  

---

