Structural Change and Productivity Flashcards
Define structural change
Structural change refers to the change in the distribution of output, income and employment in the economy over time
Give three examples of structural change
Business firms act to the needs of their customers
Buyer preferences change in response to technological change and price signals
Demographic changes
Outline the general pattern of structural change that occurs as a country develops
Structural change and economic growth are co-related. In the short term, structural change can be disruptive. Workers in declining sectors of the economy find their skills are no longer in demand and they may face long periods of unemployment. Sometimes, rapid developments in one sector attracts labour and capital resources and rewards them with higher incomes. A two speed economy can be the result. Benefits eventually outweigh the losses
Provide one reason why the manufacturing sector accounts for less output as economic development proceeds
Because demand for manufactured goods decline overtime as the economy turns towards other sectors of the economy
What are price signals?
A price signal is a change in the price of a good or service which indicates that the supply or demand should be adjusted.
For example, if there is a shortage of oranges, the price will increase, signalling that the purchase and consumption of oranges must be reduced.
Provide one example each of positive and negative impacts of structural change
New jobs - long-term
Unemployment - short-term
Outline the impact of structural change on economic growth
Structural change can be disruptive in the short term, yet it can be positive in the long-term
Define productivity
Productivity refers to the efficiency with which people or firms convert productive resources into outputs of goods and services
Define labour productivity
Labour productivity refers to the output produced per unit of labour inout LP=Q/L
Explain the meaning of multifactor productivity
Multifactor influences on productivity refer to all the ‘other’ improvements in the quality of productive inputs or the efficiency with which they are combined
Give three reasons to explain slower productivity growth in the period 2004-10
The impact of ICT innovation slowed, agricultural output fell due to drought, and capital productivity fell nearly 20%
Suggest how drought and globalisation could reduce productivity
Climate change events such as drought due to adverse weather can decrease productivity
Globalisation on the tradable sector, exposes it to more competition, reduces productivity
What are the key drivers of productivity?
Investment in physical capital and infrastructure - more capital equipment per worker
Investment in human capital - education and training
Innovation - new ideas
Enterprise - crucial determinant of firms ability to improve operations
Competition - incentive to innovate and ensures efficient resource allocation
Economic stability and capability creates a base for progress
How important are day-to-day business activities in developing a more productive economy?
The profit motive and forces of competition are the main drivers of innovation and investment which are key to increasing productivity
Investment in capital equipment increases efficiency in labour, specialisation and better technology
Explain the role of management in improving productivity
Responding to market changes, developing the workforce, better use of ICT, attracting and retaining high quality people and promoting employee participation in decision making
Productivity and happiness tend to co-exist
