2.1 production and productivity

a firm is

a productive organisation which sells its output of goods or services commercially

production

converts inputs of factors of production into an output which will satisfy consumer needs and wants

productivity is

output per unit of input

labour productivity is

output per worker

being more productive means that

with the same input there is greater output over the same period of time, it lowers average cost of production

productivity can be increased by

by training workers or using more advanced capital machinery

marginal returns of labour is

the change in quantity of total output resulting from the employment of one more working, with all other FOP fixed

law of diminishing returns is

a short term law that states that as a variable FOP is added to a fixed FOP eventually both marginal and average returns will begin to fall

average returns of labour is

the total output divided by the number of workers

relationships between marginal and average

when marginal is greater than the average, the average rises. when marginal is less than the average, average falls. when marginal equals the average, average is constant.

the UK’s low productivity could be due to

inadequate investment in new capital goods, employers hoarding employees rather than redundancy