Larger firms tend to be more capital-intensive than smaller firms
A rise in the cost of labour
Can cause firms to switch to a capital-intensive method of production
Advnatages Capital-Intensive Production
Despite the high initial investment, in the long term machines can be cheaper than using lots of manual labour
Machinery is often more precise than human workers, which might lead to more consistent quality levels
Machinery is able to work 24/7 and is easier to manage than people
Disadvantages of Capital-Intensive Production
Machinery can be very expensive to buy and maintain, meaning it can be difficult for small or start-up firms to be very capital-intensive
Machines are usually only suited to one task, which makes them inflexible
If machinery breaks down, it can lead to long delays in production, which could mean the firm misses out on sales and risks its reputation being damaged
The fear of being replaced by a machine can cause workers' motivation to ductivity of the workforce