What does productivity measure in an economic context?

Productivity, in an economic context, specifically measures the amount of output produced per unit of input used. This can refer to the quantity of goods and services generated relative to the resources utilized, such as labor, capital, and materials. By focusing on the relationship between output and the resources employed, this measure highlights how well an economy or individual business is using its inputs to generate products or services.

A key aspect of productivity is its implication on efficiency; when productivity increases, it generally indicates that an entity is producing more with the same or fewer resources. This efficiency can lead to lower costs and higher profits, but the core definition of productivity emphasizes the output relative to input rather than financial measures or profitability. Hence, productivity is often regarded as a crucial factor in assessing economic performance and growth potential, showcasing its direct link to the actual physical output resulting from resource use.