MGT 250 Lecture Notes - Lecture 52: Total Factor Productivity
7 Jun 2018
School
Department
Course
Professor
• Types of Productivity:
➢ There are 2 common measures of productivity.
1. Partial Productivity: indicates how much of a particular kind of input it
takes to produce an output.
Partial Productivity = Outputs / Single Kind of Input
o Labor:
▪ One kind of input that’s frequently used when determining partial
productivity.
▪ Indicates cost/# of hours of labor it takes to produce an output.
▪ The lower the cost of the labor to produce a unit of output or the
less time it takes to produce a unit of output → higher the labor
productivity.
▪ Labor cost as a % of revenue is a basic measure of labor
productivity used in the airline industry.
❖ The lower the % of revenue attributable to labor costs → more
productively airline uses labor to generate a unit of revenue.
◆ Dollars
◆ Euros
◆ Etc.
o Partial productivity assesses how efficiently companies use only 1
input when creating outputs.
2. Multifactor Productivity: indicates how much labor, capital, materials, &
energy it takes to produce an output.
Outputs / (Labor + Capital + Materials + Energy)
o An overall measure of productivity that assesses how efficiently
companies use all the inputs it takes to make outputs.
➢ Q: Should managers use multiple or partial productivity measures?
o In general, they should use both.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
There are 2 common measures of productivity: partial productivity: indicates how much of a particular kind of input it takes to produce an output. Partial productivity = outputs / single kind of input: labor, one kind of input that"s frequently used when determining partial productivity. The lower the % of revenue attributable to labor costs more productively airline uses labor to generate a unit of revenue. Etc: partial productivity assesses how efficiently companies use only 1 input when creating outputs, multifactor productivity: indicates how much labor, capital, materials, & energy it takes to produce an output. Outputs / (labor + capital + materials + energy: an overall measure of productivity that assesses how efficiently companies use all the inputs it takes to make outputs. Q: should managers use multiple or partial productivity measures: in general, they should use both. relative to competitors, multifactor productivity indicates company"s overall level of productivity.
