3.14 Production & Intensity

Define productivity

measure of efficiency of factors of production

Define production

measure of value of output of goods/services

Productivity
> In the l__ term, is a sig. determinant of e__ growth & i__
> ↓l__ productivity = ↑firm’s cost of p__
> ↑labour productivity = firms can pay e__ ↑w__ & ↑profits

long, economic, inflation, labour, production, employees, wage

Factors Affecting Labour Productivity

Ø  Amt of c__. in market Ø  Advances in t__ Ø  Specialisation/d__ of labour Ø  Business i__ in new capital

Ø  Investment in tr__ Ø  Quality of m__ in firm Ø  Higher quality infrastructure Ø  Strength of d__ for product

comp, tech, division, investment, training, management, demand

Production Intensity
1.      L__ Intensive
Production relies on using more __ than __ e.g. hotels, restaurants

labour, labour, capital

Labour Intensive

Adv	Disadv
Ø  L__ unit costs in low wage conditions Ø  Labour is f__; training, multi-skilling Ø  Labour at the heart of production process = continuous improvement	Ø  ↑risks of issues w/ employee/employer Ø  High c__ if high staff turnover (leaving) Ø  Needs continuous investment in t__

low, flexible, costs, training

Production Intensity
2.      C__ Intensive
>   Production relies on using more __ than __ e.g. oil extraction

capital, capital, labour

Capital Intensive

Adv	Disadv
Ø  ↑chance of E__ Ø  Potentially ↑productivity Ø  ↑q__ & s__ (depends on product) Ø  ↓labour c__	Ø  Large i__ needed Ø  Potential for loss of competitiveness bc of obsolescence Ø  May make resistance to change by labour

EoS, quality, speed, cost, investment

Unit Costs – Intensity

Labour Intensive	Capital Intensive
Ø  ↑l__ costs, ↓__ costs Ø  V__ costs = ↓break-even output Ø  Firms benefit from access to sources of low-cost l__	Ø  ↑c__ costs, ↓__ costs Ø  Fixed costs = ↑break-even output Ø  Firms benefit from access to sources of low-cost, long-term financing

labour, capital, variable, labour, capital, labour