Capital and Labour Intensity

What are the two-factor inputs of production operations?

• Labour – i.e. management, employees (full-time, part-time, temporary etc)

• Capital – i.e. plant & machinery, IT systems, buildings, vehicles, offices

How can a specific business production be described as intensive?

• Labour-intensive production relies mainly on labour

• Capital-intensive production relies mainly on capital

What are examples of labour intensive production?

• Food processing (e.g. ready meals)

• Hotels & restaurants

• Fruit farming/picking

• Hairdressing & other personal services

• Coal mining

What are examples of capital intensive production?

• Oil extraction & refining

• Car manufacturing

• Web hosting

• Intensive arable farming

• Transport (airports, railways etc)

What are the main features of labour intensive operations?

• Labour costs higher than capital costs

• Costs are mainly variable in nature = lower breakeven output

• Firms benefit from access to sources of low-cost labour

What are the main features of capital intensive operations?

• Capital costs higher than labour costs

• Costs are mainly fixed in nature = higher breakeven output

• Firms benefit from access to low-cost, long-term financing