16413474
Description
Mind Map by Carina Storm, updated more than 1 year ago
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Created by Carina Storm
over 5 years ago
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4.3 - Efficiency and
Labour Productivity
- Importance of Labour
Productivity and Efficiency
- Labour Productivity =
- Measures the efficiency
of labour
- Measures the efficiency
of labour
- Efficiency =
- Takes into consideration
all factor inputs (factors
of production) - labour,
capital, land and natural
resources and enterprise
- Efficiency is defined as:
Output (production) is
maximized from a given
level of inputs
- Efficiency is defined as:
Output (production) is
maximized from a given
level of inputs
- Takes into consideration
all factor inputs (factors
of production) - labour,
capital, land and natural
resources and enterprise
- BENEFITS OF HIGH
LABOUR
PRODUCTIVITY
- Efficient use of inputs allows businesses to maximize
production and therefor satisfy the needs of more customers
- Efficient use of inputs means that fewer inputs are needed to
produce a given level of output.
- This reduces unit
costs for the business
- This reduces unit
costs for the business
- Lower unit costs enable a business to gain a competitive
advantage because a business can lower its prices and yet still
maintain the same profit margin
- Where consumers desire high quality, the cost savings from
greater efficiency can be used to improve the quality of the
product
- By comparing its labour productivity with its level of efficiency,
a business can recognize whether it should modify the balance
of its inputs in order to improve overall efficiency.
- E.g.
- If the business has high labour productivity and
low efficiency, this suggests that it can improve its
efficiency by increasing its labour force and
reducing the use of other inputs, such as capital.
- Similarly, if there is low labour productivity and
high efficiency, this suggests that labour should be
replaced by other inputs in order to improve
overall efficiency.
- Similarly, if there is low labour productivity and
high efficiency, this suggests that labour should be
replaced by other inputs in order to improve
overall efficiency.
- If the business has high labour productivity and
low efficiency, this suggests that it can improve its
efficiency by increasing its labour force and
reducing the use of other inputs, such as capital.
- E.g.
- High labour productivity and efficiency can also enable the
business to increase its appeal to its stakeholders. Greater
efficiency may allow the business to:
- Pay higher wages to its
workers
- Offer lower prices or
improve quality for
consumers
- Spend more money on the
local environment
- Increase overall profits for
its shareholders
- Pay higher wages to its
workers
- HOW TO INCREASE
EFFICIENCY AND
LABOUR PRODUCTIVITY
- Improving the fertility of land
- Using renewable or recyclable resources
- Greater education and training of the
workforce
- Increasing the level of investment in
capital equipment
- Improvements in management skills
and a willingness to take risks by
businesses
- Combining the factors of production
in a balanced way
- Extending the overall scale of
production
- As a business grows larger it
tends to improve both labour
productivity and efficiency. The
benefits that lead to these
improvements are known as
ECONOMIES OF SCALE
- ECONOMIES OF SCALE
- Fixed costs, such as the depreciation
of machinery and administrative
expenses, must be paid, regardless of
the number of units that an
organization produces and sells. This
enables large firms that utilize their
equipment effectively to produce at
much lower costs per unit.
- INTERNAL economies of scale
(often abbreviated to economies
of scale) can be classified under a
number of headings including:
- Technical Economies
- Specialisation Economies
- Purchasing Economies
- Marketing Economies
- Financial Economies
- Research and
Development Economies
- Social and Welfare
Economies
- Managerial and
Administrative
Economies
- Technical Economies
- INTERNAL economies of scale
(often abbreviated to economies
of scale) can be classified under a
number of headings including:
- Fixed costs, such as the depreciation
of machinery and administrative
expenses, must be paid, regardless of
the number of units that an
organization produces and sells. This
enables large firms that utilize their
equipment effectively to produce at
much lower costs per unit.
- ECONOMIES OF SCALE
- As a business grows larger it
tends to improve both labour
productivity and efficiency. The
benefits that lead to these
improvements are known as
ECONOMIES OF SCALE
- DIFICULTIES INCREASING
LABOUR PRODUCTIVITY AND
EFFICIENCY
- DISECONOMIES OF SCALE
- As organisations grow, they may suffer
disacvantages that lead to a lowering of
efficiency and higher unit costs of
production. These are known as
DISECONOMIES OF SCALE or INTERNAL
DISECONOMIES OF SCALE. Some
examples are as follows:
- Co-ordination diseconomies
- Communication Disconomies
- Motivation Diseconomies
- Other Diseconomies of Scale
- Co-ordination diseconomies
- As organisations grow, they may suffer
disacvantages that lead to a lowering of
efficiency and higher unit costs of
production. These are known as
DISECONOMIES OF SCALE or INTERNAL
DISECONOMIES OF SCALE. Some
examples are as follows:
- DISECONOMIES OF SCALE
- HOW TO CHOOSE THE
OPTIMAL MIX OF
RESOURCES
- Factors influencing the choice
between capital-intensive and
labour-intensive production
- Methods of Production
- Skills and efficiency of the
factors of production
- Relative costs of labour
and capital
- Size and Financial position
of a business
- Product or service
- Customers
- Methods of Production
- Factors influencing the choice
between capital-intensive and
labour-intensive production
- Improving the fertility of land
- Efficient use of inputs allows businesses to maximize
production and therefor satisfy the needs of more customers
- Labour Productivity =
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