4.1.4.1 Production and productivity Flashcards
What is production in economics?
Production is the process of converting inputs (e.g., capital, labor) into final output, which satisfies consumer needs and wants.
What are the factors of production?
The factors of production are inputs used in production, including land, labor, capital, and enterprise.
What is productivity?
Productivity measures how efficiently inputs are converted into outputs. It is often calculated as output per unit FOP per period of time.
What is labor productivity?
Labor productivity measures the output produced per worker in a given period of time. It is a key indicator of economic efficiency.
How is productivity calculated overall?
Productivity is calculated as:
Productivity = Total Output / Quantity of FOPs
What does it mean to be more productive?
Being more productive means producing more output with the same input (e.g., the same number of workers) over the same period of time.
What does it mean to be less productive?
Being less productive means requiring a larger input (e.g., more workers) to produce the same quantity of output.
How can productivity be increased?
Productivity can be increased by:
- Training workers to improve skills.
- Using more advanced capital machinery.
- Improving technology and processes e.g better assembly lines (innovation)
Overall, increasing the Quality and/or Quantity of FoP
Why is productivity important for firms?
Higher productivity lowers average costs per unit of output, making firms more competitive and profitable.
How does productivity affect average costs?
Increased productivity reduces average costs because more output is produced with the same input, spreading fixed costs over more units.
What is the relationship between productivity and economic growth?
Higher productivity contributes to economic growth by increasing the total output of goods and services in the economy.
What is an example of improving labor productivity?
**Training workers to use advanced machinery **can increase output per worker, improving labor productivity.
How does capital investment affect productivity?
Investing in advanced machinery or technology can increase productivity by enabling workers to produce more output in the same time.
What is the impact of low productivity on firms?
Low productivity increases average costs, making firms less competitive and reducing profitability.
How does productivity influence consumer prices?
Higher productivity can lower production costs, allowing firms to reduce prices for consumers while maintaining profitability.
What is the role of technology in productivity?
Technology improves productivity by enabling faster, more efficient production processes and reducing the need for manual labor.
How does productivity affect wages?
Higher productivity can lead to higher wages, as firms can afford to pay workers more when they produce more output.
What is the difference between production and productivity?
Production: The process of converting inputs into outputs.
Productivity: A measure of how efficiently inputs are converted into outputs (output per worker).
