How do you economists measure productivity??

Answer: Economists measure productivity, often called economic productivity, by comparing the amount of goods and services produced (output) with the inputs used in production. The most common measure of productivity is called labor productivity and is calculated by dividing the total output of goods and services by the number of labor hours used to produce that output.

Here's the basic formula for labor productivity:

Labor Productivity = Total Output / Total Labor Input

Where: - Total Output is measured typically as the real Gross Domestic Product (GDP) or Gross Value Added (GVA), in order to account for inflation and ensure that the value of output is in constant prices. - Total Labor Input is the total number of hours worked or, in some cases, the number of full-time equivalent employees.

Productivity can also be measured for other inputs like capital. Total factor productivity (TFP) is another measure, also known as multi-factor productivity, and it includes both labor and capital as well as other factors in the inputs category.

Here’s a simple way to understand Total Factor Productivity:

TFP = Total Output / Weighted Average of Labor and Capital Input

This shows how efficiently and effectively inputs are being used in the production process. An increase in TFP suggests that there is an improvement in the overall efficiency, which could be due to technological advances, improved skills, or better management practices.