How is productivity defined?

Productivity is defined as the measurement of output per unit of input, which reflects how efficiently resources (such as labor, capital, and materials) are being utilized to produce goods and services. This measurement can be expressed in various forms, for instance, how much output is generated per hour of labor or how much output is produced per unit of capital employed.

This definition is crucial because it highlights the relationship between inputs and outputs within an economy or organization. A higher productivity indicates that more is being achieved with the same amount of resources, leading to improved efficiency and potentially higher profitability. In essence, measuring productivity allows businesses and economists to gauge the effectiveness of production processes and make informed decisions regarding resource allocation and operational improvements.