Chapter 2.docx

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2 Apr 2012

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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
produce it
Quality: a product’s fitness for use in terms of offering the features that consumers want
Measuring Productivity
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.
Industry Productivity:
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
Company Productivity:
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
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