productivity investment, economic growth, and standard of living
TRANSCRIPT
![Page 1: Productivity Investment, economic growth, and standard of living](https://reader035.vdocument.in/reader035/viewer/2022062718/56649e8a5503460f94b8f347/html5/thumbnails/1.jpg)
Productivity
Investment, economic growth, and standard of living
![Page 2: Productivity Investment, economic growth, and standard of living](https://reader035.vdocument.in/reader035/viewer/2022062718/56649e8a5503460f94b8f347/html5/thumbnails/2.jpg)
Productivity
• Inputs: – Resources used to produce a something
• Money, time, energy, manpower, natural resources
• Outputs– What is produced by using inputs
• Goods, services
• Productivity is measured by dividing output by the number of inputs to produce the outpot
• More productivity =– More output (products) with same inputs (resources)– Same output with less inputs
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What increases productivity?
• INVESTMENT!!!!– Capital Goods
• Equipment and machines that help your business produce more efficiently
– Human capital• Education and training that make your employees
produce more efficiently
• Investments in capital goods and human capital cause economic growth
• More output = economic growth
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Effects?
• When a business increases productivity, it makes more profit and grows
• When a country increases productivity, its people enjoy a higher standard of living
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Rational Decision-Making
• Marginal Cost: ADDITIONAL cost of adding more inputs (resources)
• Cost of hiring one more worker• Cost of buying one more machine
• Marginal Benefit: ADDITIONAL benefit of adding more inputs
• Extra profit the extra worker brings your business• Extra profit the machine brings your business
• Rational Decision Making: When marginal benefits exceed marginal costs