Question

Discuss the various factors of productivity, how it is determined and changes that have occurred over time that have increased productivity. Use the production function - Y = AF(L,K,H,

Answer 1

answer :

Factors of production : those factors which helps in the production process are known as factors of production. The important factors are as follows:

• Land
• Labour
• Capital
• Technology
• Entrepreneur etc.

Land : it is an important factor of production. All natural resources and raw materials which help in production are included under it.

Labour : it is a work force which is an key factor in the production process.

Capital: all the machinery, equipments, assets and monetary power is included under it. To establish a production unit capital is an important factor to consider.

Technology: modern and innovative techniques increase the production of a firm so now a day it has become in important and separate factor in the production process.

Entrepreneur: it is a human resource or skilled man power which increases the production by their innovative and creative ideas. Entrepreneur due to their invention, creative thoughts and discoveries put the foundation for the production units.

It is determined by the production function:

                                                 Y = AF(L,K,H)

Where :

• Y- is output   
• A – technology
• L- labour
• K – capital
• H – human capital

The production function shows that output is the function of labour, capital, human capital and technology. All these factors of production determine the production of a firm. The more efficient use of these factors the more output firm will get.

Changes that have occurred over time that have increased productivity are:

• Improvement in technology
• Increase in skilled labour
• Increase in human capital
• Change in ratio of use of factors
• Efficient utilization of factors.

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