The elasticity of output with respect to capital
A)is the increase in output resulting from an increase in the capital stock.
B)is the percentage increase in output resulting from a one percent increase in the capital stock.
C)is always greater than one.
D)is the inverse of the elasticity of output with respect to labour.

Question

Quizplus · Accepted Answer

The elasticity of output with respect to capital is defined as the percentage change in output resulting from a one percent increase in the capital stock. Option A is incorrect because it does not account for the proportionate increase in output. Option C is incorrect because the elasticity of output with respect to capital can be either less than or greater than one depending on the level of capital utilization. Option D is incorrect because there is no direct mathematical relationship between the elasticity of output with respect to capital and labor.

The Elasticity of Output with Respect to Capital