The law of diminishing marginal productivity states that the amount of variable factor in the firm will come to a point when the additional input of a new employee (variable factor) will only to result in a fall in marginal product of the previous employee. In my workplace for example, having too many workers yet too few computers can result in decrease in marginal product. For example, given that we add the sixth worker into the office when there are only five computers around, the sixth worker will have very limited amount of things he can do due to resource constraints, this will bring…
With a limited number of employees, productivity is vital to the success of the business. With the growth of a new company, it is expected that productivity may start off slow. As employees and customers become comfortable, productivity is expected to increase. A learning curve is in place as well as a merit reward system for increased sales and services.…
The economic principle that producers are willing to produce more output when price is high is depicted by the:…
The unemployment rate in the United States has dropped significantly ever since the economy crashed in 2008 when unemployment rapidly climbed. Unemployment is still higher than it should be but at least the rate is decreasing. On a national level the unemployment rate has dropped from 8.3% in January 2012 to 7.9% in January 2013 (United States Department of Labor, 2013). Over the past year unemployment has changed very little with an exception of a drastic decline in unemployment during the third quarter of 2012 (United States Department of Labor, 2013). According to the United States Department of Labor, more than 300 thousand persons was removed from the labor force willing and able to work; however, did not actively search for a job within the last four weeks. This contributed to the fall in unemployment rates. Employment has…
To remain competitive with competition like T-Mobile, Verizon Wireless has begun to include a video calling feature for families who are currently enrolled in their family plan at no additional charge. The plan will be cost effective while giving customers high quality HD voice and video calling features. The market for video chatting is becoming more and more popular with more apps popping up every year.…
Basic Concepts 1. The relationship between the quantity of output (such as wheat, steel, or automobiles) and the quantities of inputs (of labor, land, and capital) is called the production function. Total product is the total output produced. Average product equals total output divided by the total quantity of inputs. We can calculate the marginal product of a factor as the extra output added for each additional unit of input while holding all other inputs constant. 2. According to the law of diminishing returns, the marginal product of each input will generally decline as the amount of that input increases, when all other inputs are held constant. 3. The returns to scale reflect the impact on output of a balanced increase in all inputs. A technology in which doubling all inputs leads to an exact doubling of outputs displays constant returns to scale. When doubling inputs leads to less than double (more than double) the quantity of output, the situation is one of decreasing (increasing) returns to scale. 4. Because decisions take time to implement, and because capital and other factors are often very long lived, the reaction of production may change over different time periods. The short run is a period in which variable factors, such as labor or material inputs, can be easily changed but fixed factors cannot. In the long run, the capital stock (a firm's machinery and factories) can depreciate and be replaced. In the long run, all inputs, fixed and variable, can be adjusted. 5. Technological change refers to a change in the underlying techniques of production, as occurs when a new product or process of production is invented or an old product or process is improved. In such situations, the same output is produced with fewer inputs or more output is produced with the same inputs. Technological change shifts the production function…
Productivity is fundamentally good, and the production of necessary material items for both us and…
As more resources are moved from the allocation towards the production of one good to the production of another good, the opportunity costs increase because the resources are not as efficient in the making of the chosen product.…
Productivity growth refers to the relationship between increases in production and services (output) in relation to a constant level of input such as labour, capital and land. (ABS, 2004). Considered more broadly, productivity measure the ability of a nation to harness its physical and human resources to produce output efficiently (Productivity Commission, 2003 )…
In the earlier chapters of this course, we were introduced to basic principles of economics and to the Production Possibility Frontier. The Production Possibility Frontier is a graphical representation of various combinations of the amounts of two commodities that could be produced using the same factors of production. When the point lies on the curve line of Production Possibility Frontier that means that a company or economy is functioning with maximum efficiency; meaning that with available factors of production the productivity output is at its highest point. Everything on the inside of the Production Possibility Frontier line means that a company, or economy is not using all available resources for production; on the other hand, everything on the outside of the Production Possibility Frontier line is un-obtainable. In order to achieve that level of production, factors of production need to change. That refers to improvement in technology, labor force, or…
Moreover, helps differentiate good methods from worse ones. On the macro level productivity tends to be consistent. So if there is a decrease in productivity then an economy will head toward downward spiral. However, if there is an increase in productivity then the economy will be heading toward an upward spiral. This makes sense a better use of resources will continue to increase productivity. As noted by Adam Smith “wealth is labor” however only “labor that adds value to another” can be turned in to wealth. Also, productivity in macro terms is the link of several industries that together create greater output. A factor of productivity that most don’t take into consideration is the depreciation of resources that diminish at different speeds through time. Once depreciated only an investment can bring the same resource back practice. Therefore, the correct calculation of depreciation of resources is important for future investments to be planned and not unexpected. This ties with capital allocation that must be effective for productivity to grow in an economy. Incorrect capital allocation will result in no growth or even a decline in productivity. Most importantly factor of productivity in the past century is an increase in technological innovations. However, just like capital, if technology is not allocated properly then its benefit will be lower (Matache…
In economics, diminishing returns (also called diminishing marginal returns) refers to how the marginal production of a factor of production starts to progressively decrease as the factor is increased, in contrast to the increase that would otherwise be normally expected. According to this relationship, in a production system with fixed and variable inputs (say factory size and labor), each additional unit of the variable input (i.e., man-hours) yields smaller and smaller increases in outputs, also reducing each worker's mean productivity. Conversely, producing one more unit of output will cost increasingly more (owing to the major amount of variable inputs being used, to little effect).…
Productivity is a measure of output from a production process, per unit of input. For example, labor productivity is typically measured as a ratio of output per labor-hour, an input. Productivity may be conceived of as a metric of the technical or engineering efficiency of production. As such, the emphasis is on quantitative metrics of input, and sometimes output. Productivity is distinct from metrics of allocative efficiency, which take into account both the monetary value (price) of what is produced and the cost of inputs used, and also distinct from metrics of profitability, which address the difference between the revenues obtained from output and the expense associated with consumption of inputs. Labour productivity is the ratio of (the real value of) output to the input of labour. Where possible, hours worked, rather than the numbers of employees, is used as the…
Productivity Improvement is a challenge to every Industry. As we know Change is constant, so is the demand and requirement of customers. At the same time competition is fierce and is also changing. There has to be continuous efforts for productivity Improvement so as to sustain and grow. Productivity Improvement means efficiency improvement at all stages ie., Manpower, energy, machinery, Process & money etc., The profit of any Company depends upon Productivity.…
1. As production of a product increases, the opportunity cost rises along with it. If the production is inefficient, then by logic, production will go down as will opportunity cost.…