How does the difficulty level affect the gameplay in Skyrim?

Question

There are five difficulty settings on Skyrim;

1. Novice
2. Apprentice
3. Adept
4. Expert
5. Master

How do these effect the gameplay?

Answer

According to the UESP, the difficulty level affects the damage you deal and the damage you receive:

Difficulty | Damage Dealt | Damage Taken
-----------------------------------------
Novice     | x2           | x0.5
Apprentice | x1.5         | x0.75
Adept      | x1           | x1
Expert     | x0.75        | x1.5
Master     | x0.5         | x2

Based on this, there are a few things you can extrapolate as the difficulty level increases:

• Skills based on damage increase more slowly, and in turn, the slower you level up (thanks yx.)
• Followers can be knocked out, and in turn, killed, more easily
• Your effective health decreases
• Enemies' effective health increases

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