How productive is a machine?

Productivity in economics measures the amount of output for a certain amount of input. So a machine may have a productivity of, say, two kettles or televisions for every machine employed.

Companies and people are not born tied to a fixed machine that they can never exchange; generally, they can buy and sell machines at market. So the value of the input machine can be compared to the value of the output. The two kettles might be worth $50 and the machine might be worth $40, so we can measure the productivity as $10. There are a variety of ways of measuring productivity in numbers, such as saying it is $50 divided by $40 instead of the $50 minus $40 here.

The value of the machine is decided in market exchanges, and hence so is the productivity of the machine. It depends not just on the cost of raw materials used to make the machine, but also on the market power of the buyers and sellers. So a machine in a monopoly market may be less productive than the same machine if the market was competitive. The cost of the outputs is the same, but the cost of the inputs is different.