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Detailed Notes of Chapter 12

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University of Toronto St. George
Rotman Commerce
Michael Szlachta

Chapter 12 The Productivity-Quality Connection Productivity: a measure of economic performance that measures how much is produced relative to the resources used to produce it. Quality: a products fitness for use in terms of offering the features that consumers want. Measuring Productivity Labor Productivity: partial productivity ratio calculated by dividing gross domestic product by total number of workers. o Compares a countrys annual output of goods and services with the resources used to produce that output. o Firms that compete internationally have more incentive to be more productive. Countries have different levels of productivity based on their current technology, worker intelligence, economic policies, natural resources, and even traditions. Domestically, countries must be productive because that will increase its overall wealth => increasing its living standards. o Higher Wealth: can be shared with the whole population. Prices will be relatively low and stable Higher wages, investors get higher profits. o Lower Wealth: a portion of the population will benefit from the expense of others. Increased prices Reducing profits o Manufacturing tends to have higher productivity becausemachines are mostly used. o Baumols Disease:since service sector focused more on hands on activity that machines couldnt replace, it would bemore difficult to increaseproductivity in services. o Highly productive companies have lower costs, thus offer its productsservices at lower prices. Total Quality Management Fishbone method=cost and effect diagram. Total Quality Management (TQM): all the activities necessary for getting high-quality goods and services into the market place. Performance Quality: the features of a product and how well it performs. Quality Reliability: the consistency or repeatability of performance.
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