Production and productivity Edexcel International GCSE Economics revision
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In plain words
Production is how much is made. Productivity is how much is made by each worker, or each machine, or each hectare. A firm can raise production just by hiring more people. To raise productivity it has to get more out of what it already has.
Higher productivity means lower costs for each unit, which is why firms and governments care about it.
6 things to know
- Production is the total output. Productivity is output per unit of input.
- Labour productivity = total output ÷ number of workers (or hours worked).
- Productivity rises with training and education, more and better machinery (investment), new technology, division of labour and well-motivated workers. Land is made more productive with fertiliser, irrigation and drainage.
- Labour-intensive production uses a lot of labour compared with capital: hand-made goods and most services. It suits small-scale or personal work, and places where labour is cheap.
- Capital-intensive production uses a lot of machinery compared with labour: car plants, oil refineries. It suits mass production, but it is costly to set up.
- A firm's demand for a factor of production depends on the demand for its product, and on the factor's price, availability and productivity.
Worked example
A factory's 40 workers make 2000 chairs a week. After new machines are installed, the same workers make 3000. What has happened to labour productivity?
- Before: 2000 ÷ 40 = 50 chairs per worker.
- After: 3000 ÷ 40 = 75 chairs per worker.
- Productivity has risen by 25 chairs per worker, which is an increase of 50%.
Tips and tricks
- Production can rise while productivity falls: hire many more workers and total output goes up even if each one makes less.
- Investment means spending on capital goods, such as machines. More investment is the usual route to higher productivity.
It lands in your notebook with its questions as flashcards.
Production and productivity: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Productivity is
For labour, it is output per worker.
25 workers produce 1500 units. What is the labour productivity?
1500 ÷ 25 = 60.
Which would raise labour productivity?
Better-skilled workers each produce more.
Which is an example of labour-intensive production?
A haircut needs a person's time and skill, and little machinery.
A firm doubles its workforce and its output rises by 50%. What has happened?
Total output is up, but each worker now produces less than before.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 7 marks. Write your answers on paper, then check them.
Production and productivity
Edexcel International GCSE Economics 4EC1 · 7 marks · papermunch.org
Name ______________________________ Date ______________
Explain the difference between production and productivity.[2]
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Production is the total amount of output. Productivity is the output per unit of input, such as output per worker.
A farm's 12 workers harvest 600 tonnes of potatoes. Calculate the labour productivity.[2]
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50 tonnes per worker. 600 ÷ 12.
Explain why a car manufacturer is likely to use capital-intensive production.[3]
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Cars are mass-produced in large numbers to the same design, so machines and robots can do the work faster and more accurately than people, which lowers the cost of each car.
Answers: Production and productivity
- 1. Production is the total amount of output. Productivity is the output per unit of input, such as output per worker.
- 2. 50 tonnes per worker. 600 ÷ 12.
- 3. Cars are mass-produced in large numbers to the same design, so machines and robots can do the work faster and more accurately than people, which lowers the cost of each car.