Productivity Flashcards
What is productivity ?
It measure how efficient the business is at using its resources. A more appropriate definition states that it is the amount of output that can be produced using per unit of input(land, labour, capital) . This therefore enhances the production process. The more productive the firm is, the more output that can be produced at a relatively low cost. This results in more being produced without using more input or resources.
What is the formula for productivity?
Total output / total input
What are the factors of productivity?
Technology
Level of pricing
Market demand
Competition
Quality of the labour supply
Explain technology
With ever changing and improving technology it can provide significant benefits to businesses once they make use of this improvement. When improved technology is employed it allows for more output to be produced using the same amount of input. Technology that is improved may result in the minimizing of wastages of resources. New and improved technology can therefore lead to an increase the Level of output produce per unit of input.
Explain level of prices
The firm’s productivity can be affected by changes in the price level of inputs of production. When there is an increase in the factor prices( land, labour or capital) it will result in a reduction in the level of production. When there is an increase in the prices of consumer goods it is affected by the emphasis the firm has put into improving productivity. If inflation occurs and the prices of the output increases firms would be content as they are earning higher prices without having to improve the quality of productivity. In this case productivity is relatively low.
Explain market demand
When the demand for a product is high it usually generates higher levels of productivity. Therefore, business seek to increase it productive capacity. They do this by employing production-improving- technology or encouraging workers to produce more given the resources. Management is fully aware that if they improve productivity it would increase the likelihood of them meeting the ever growing demand. Efforts would be made to increase output per man and hence productivity.
Explain competition
When there is a lack of competition it leads to an impede in improving productivity.
Firms who are operating in a highly fierce markets would be more inclined to improve productivity in order to survive in the market. To improve or increase market share the firm has to product high quality good that will meet the need of it consumers at competitive prices. The goal is to boast productivity by increasing the amount of output that can be product per unit of input, both increasing production and reducing cost.
