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Chapter 2: increasing Productivity and Quality
Productivity: a measure of efficiency that compares how much is produced with the resources used to
Quality: a product’s fitness for use in terms of offering the features that consumers want
Labour Productivity = GDP / Total Workers
Productivity varies from nation to nation because of many factors: technologies, human skills, economic
policies, natural resources, traditions
Canada’s competitiveness is a concern because we have been living off our rich diet of natural
resources. Canada needs to start emphasizing innovation and develop a more sophisticated mix of
products if it hopes to be successful in international markets.
A country that improves it ability to make something out of its existing resources can increase wealth of
all its inhabitants. A decline in productivity shrinks a nation’s total wealth.
Manufacturing VS Service Productivity
Manufacturing productivity is higher than service productivity because since the service sector focussed
more on hands-on activity that machines couldn’t replace, it would be reo difficult to increase
productivity in services. (Baumol’s disease)
Productivity gains are starting to appear among a wide array of service providers such as airlines, pet
stores, package delivery companies, provider of financial services, and retail establishments by
becoming more factories like.
Agriculture is more productivity in Canada than in many other nations because we use more
sophisticated technology and superior natural resources. Technological advances have also given the
computer industry a productivity edge in many areas.
Productivity of specific industries concerns many people:
Labour unions – for negotiation contracts
Investors and suppliers – making loans, buying securities, planning future production
Gives company a competitive edge because its costs are lower
Make a greater profit
Pay worker higher wages without raising prices
Important to investors, workers, and managers
Profit-sharing plans are based on the company’s productivity
To plan for new products, factories, and funds to stay competitive