Economics Theme 2.3.1 Flashcards
What factors effect productivity of machines
Age of machinery and maintenance
Training of operatives
Quality of inputs e.g. a high quality printer can jam if cheap paper is used
Hours used v down time
Efficiency of programming
Unforeseen events e.g. power cuts
What will happen if productivity is increased
Increased productivity will lower unit costs
This can be passed onto the customer in the form of lower prices to give a firm a competitive advantage
Will increase output
The firm will be better able to match supply to demand in order to satisfy customers
How is productivity calculated?
Total output/
Number of employees
What influences labour productivity
Training and skills of the workforce
Motivation
Complexity of the product
What happens if labour productivity is increased
Increasing labour productivity lowers labour cost per unit (assuming employee costs stay the same)
Therefore there is an inverse relationship between productivity and wages
How may workers be encouraged to improve labour productivity
workers may be motivated to increase productivity through financial incentives
What is piece rate
Piece rate is when workers are paid per unit produced, in which case the relationship would not be inverse but there is positive correlation i.e. as productivity goes up wages go up
What are the effects of trying to increase labour productivity
May impact negatively on quality and customer satisfaction
Damage to long term reputation
Increase waste affecting unit cost
Employees may feel exploited
Working harder for the same pay, may work with unions to negotiate higher wages
Business benefiting but not the employees
Increased workload leading to stress and demotivation
What is economic growth
Economic growth is the percentage change in the total output (GDP) of a country.
An increase in economic growth can be caused by an increase in factor inputs e.g. immigration will see a growth of labour as an input so that we can produce more.
what is capital intensive
Capital intensive which uses a relatively high proportion of capital such as machinery in the production of a good or service
This tends to occur in the secondary sector of the economy i.e. manufacturing
What is labour intensive
Labour intensive which uses a relatively high proportion of labour i.e. workers in the production of a good or service
This tends to occur in the tertiary sector of the economy i.e. services
What are the advantages of capital intensive
ncreased productivity
Improved quality and speed
Reduced labour costs
Greater opportunities for economies of scale (the benefits to a business of producing on a large scale that lead to a fall in unit costs)
What are the disadvantages of capital intensive
High investment outlay
Lack of human initiative
Greater resistance to change by workforce e.g. retraining to use new equipment
What are the advantages of labour intensive
Often cheaper, especially when produced in low wage locations
Workforce can easily adapt to change, especially if multi-skilled
Continuous improvement through workforce can benefit the firm e.g. new ideas
Government funding often available to protect jobs in the economy
What are the disadvantages of labour intensive
Industrial relations can be a problem e.g. strikes
Lack of skilled workers in some industries
HRM costs can be very high e.g. recruitment, selection and training
