Factors+of+production+and+productivity

Revision Activity on Factors of Production

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The difference between production and productivity. This is very important and often confused by students. Production is the total output of goods and services and productivity is the output per unit of FOP. So we measure Labour productivity by dividing the total output produced by the number of workers. What is happening to production and productivity in the following example? in 2007 company X is producing 200 units with 10 workers. However due to the economic crisis by 2009 output has fallen to 150 units and they only have 5 workers left.

The demand for Capital and Labour:  All you have to remember is that demand for FOP is a derived demand. What that means is that you demand a FOP for what it produces. So for example a teacher is demanded for the education they provide. Therefore the demand for a FOP is determined by how much revenue they can produce. Therefore a Premiership footballer is in big demand and gains a high wage because they can generate a large amount of revenue for their football club. Remember that total revenue is found by quantity produced x the price of the product (PxQ). So demand for your labour and therefore your wages will increase if you can either produce more, or the price of the product increases.

Production requires all of the FOP but in what quantities of each?

Look up what the following terms mean:


 * Labour intensive production
 * Capital Intensive production

Summary Handout: 

[|Productivity Worksheet]