2.3.1 Productivity

What is productivity?

Productivity measures output per unit of input per period of time (e.g., output per worker per hour).

What does higher productivity mean for firms?

The same input produces more output, lowering average costs per unit.

What is labour productivity?

Output per worker per hour; used to compare efficiency between countries.

How can higher productivity affect the economy?

Lowers production costs, reduces prices, increases demand, raises employment, boosts competitiveness, and supports economic growth.

How can higher productivity affect workers?

Firms can pay higher wages, improving living standards.

What factors influence productivity?

Worker training, advanced machinery, human capital investment, access to finance, innovation, and technology improvements.

How does productivity link to competitiveness?

Higher productivity lowers average costs, allowing firms to charge lower prices and compete more effectively.

What is labour intensive production?

Production that mainly uses labour, such as services (hairdressing, hotels) or farming/mining.

What is capital intensive production?

Production that mainly uses capital, such as transport and manufacturing industries.

When is labour intensive production preferred?

When skilled labour is abundant and relatively cheap; costs are more variable, with a lower breakeven output.

When is capital intensive production preferred?

When capital is cheap and accessible; costs are more fixed, with a higher breakeven output.