Written by
Eliot King— First-Class BSc (Hons) Economics, University of Bath · 6+ years teaching A-Level Economics · Edexcel A, Edexcel B, AQA and OCR
Specification Coverage: AQA unit 1.4.1 -
Production & Productivity. Students should understand the
concept of production and productivity, and how to calculate and
interpret productivity measures.
Production
Production: The process of
combining various resources (inputs) and the factors of
production to create goods and services (outputs).
Through production, businesses add value which
enables them to sell goods and services at a higher price than
the cost of the inputs used.
Production measures the total output of goods and services
produced by a firm, industry, or economy over a specific period
of time.
Productivity
Productivity: A measure of
the efficiency of production, typically measuring the output
produced per unit of input used.
Labour productivity: A measure of the output
produced per unit of labour input, often expressed as output per
worker or output per worker per hour.
\[ \text{Labour Productivity} = \frac{\text{Output}}{\text{Number of Workers}} \]
Higher productivity is important for a business as it can lead
to lower costs per unit, higher profits, and a competitive
advantage.