Factors Affecting Productivity (Edexcel IGCSE Economics)
Revision Note
Written by: Steve Vorster
Reviewed by: Jenna Quinn
Production Versus Productivity
Production refers to the volume of output produced using the factors of production
Productivity is the output per unit of input of a resource in a given time period i.e the rate at which the output is produced
Common measures of productivity include labour productivity and capital productivity
Productivity is used to measure the efficiency of production methods
Factors affecting productivity
Productivity will increase if the quality of the input improves
Investment in human capital occurs when firms spend money on training their labour to improve efficiency and skill levels. This will increase the speed of producing an output
Investment in capital will improve both the quality of that capital and the quantity of capital available, which will increase output in a given time period
Factors Affecting Productivity
Factor of production | Explanation |
|---|---|
Land |
|
Labour |
|
Capital |
|
Productivity improvements and the PPC
Increases in productivity will cause an outward shift of the production possibilities curve
The country is able to produce more with the existing factors of production
If the quantity or quality of factors of production decreases (e.g. as a result of a natural disaster), this corresponds to an inward shift of the production possibilities curve
The country now cannot produce as much as it used to
Worked Example
Which one of the following is likely to lead to an increase in the productivity of labour? (1)
A Implementation of new AI machines
B Decrease in the use of irrigation schemes
C Increase in the number of training programs for employees
D Decrease in land fertility due to environmental degradation
Answer: C Increase in the number of training programs for employees
This would lead to a increase in the quality of labour as a factor of production
A is not correct as it is a change in capital that may replace labour
B is not correct because it will affect land and will result in a decrease in productivity
D is not correct because this would lead to a decrease in land productivity
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