Productivity importance (CH 10)

Question 1

Being more productive means same input

Answer 1

• Same no. workers
• Produces more output, over same time period
• Lowers average cost per unit of output
• Being less productive requires large input to produce same quantity of a product

Question 2

Define producitivty

Answer 2

Measure of output per worker per hour

Question 3

How is productivity measured?

Answer 3

Via labour productivity

Question 4

Productivity increases, lowers average cost of production leads to?

Answer 4

• Lower prices for consumers
• Increase demand in economy
• Higher level of employment
• Firms become globally competitive
• Especially if more productive

Question 5

What can higher productivity lead to in different scenarios?

1. Higher profits …
2. Higher rate of economic growth…

Answer 5

1. Higher profits - Investments - increases higher productivity
2. Higher rate of economic growth - Rate of production in economy increases - GDP increases

Question 6

Factors influencing productivity

Answer 6

• New technology
• Investment
• Research + Development
• Management skills
• Infrastructure
• Education and skills training

Question 7

Labour intensive production

Answer 7

• Large supply of skilled and relatively low cost
• Cost in labour tends to be more variable, so there’s a lower break even point of output

Question 8

Capital intensive production

Answer 8

• Firms can access relative cheap, long term finance + capital is relatively cheap
• Cost involved in capital tends to be fixed, so breakeven output is higher