4.1

• Production definition

  Process which converts inputs or factor services into outputs of goods or services
• factors of production definition

  Inputs into the production process (e.g land, capital, labour, enterprise)
• what are the factors of production?

  • land - natural resources
  • labour - human effort
  • capital - tools and machinery
  • enterprise - entrepreneurship that organises the other factors
• Productivity definition

  Output per unit of input
• productivity gap definition

  the different in labour productivity between, for examples, the UK and other developed countries
• labour productivity definition

  output per worker per time period
• labour productivity formula

  total output / number of workers
• why is labour productivity important?

  • higher output
  • lower unit costs
  • more competitiveness
  • potential for higher wages
• how can labour productivity be improved ?

  • better training
  • more capital equipment
  • motivation (incentives)
  • improved management
  • technology and innovation
• capital productivity definition

  output per unit of capital (machinery)
• why is there a production gap between the UK and other leading nations since the recession of 2009 (UK has lower productivity)?

  • Inadequate investments in new capital goods
  • Relative low wages in the UK economy
  • Employees ‘hoarding‘ staff rather than making employees redundant
• firm definition

  a productive organisation which sells its outputs of goods and/or services commercially