Output (economics)

Output in economics is the "quantity 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.

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.

Several different methods of measuring output are utilized.

Calculating GDP (gross domestic product) is the most popular measure of national output. The main challenge in using this method is how to avoid counting the same product more than once. Logically, the total output should be equal to the value of all goods and services produced in a country, but in counting every good and service, one actually ends up counting the same output again and again, at multiple stages of production. One way of tackling the problem of over counting is to, consider only value addition, i.e., the new output created at each stage of production.

To illustrate, we can take a dressmaker who purchased a dress material for 500 rupees, then stitched and put final touches on the dress. She then sold the dress for 800 rupees (her costs of finishing the dress were 150 rupees). We can then say that she added 150 rupees worth of output to the dress, as opposed to saying that she produced 800 rupees worth of output. So value addition is equal to the sales price of a good or service, minus all the non-labour costs used to produce it.

To avoid the issue of over-counting, one can also focus entirely on final sales, where, though not directly but implicitly, all prior stage of output creation are accounted for.

Even though both methods are widely acknowledged to be accurate, the second method is known as the expenditure method and is used more widely, and is the standard method of calculation of GDP in most countries. The logic behind using the expenditure method is that if all the expenditures on final goods are added up, the sum should total the total production because the every produced good is eventually produced in some form or the other.

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