Workers+or+machines?

This area of the syllabus shouldn't pose too many problems for you. It looks at the demand for factors of production. 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

What determines whether a firm may use capital or labour intensive production? In general how do you think that production in China takes place in terms of labour or capital intensive production?

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Key Points:

Demand for Factors of Production is a derived demand, determined by the demand for the output produced

Capital and Labour ase often substitutes for each other. Whether production is labour intensive or capital

intensive is determined by many things such as:
 * The relative costs of the factors of production
 * The efficiency of each FOP
 * How good substitutes for each other are they (could a computer do the job of a teacher?)

Finally in this section you need to know the difference between production and productivity. This is very important and often confused by students. Production is the total output 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. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">What is happening to production and productivity in the following example? <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">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.


 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Student Task: Read and make notes on this topic (P210-214 Moynihan and Titley) **