Question

• Discuss the key differences between productivity in the production of goods vs. productivity in the production of services, and list important factors that can help to improve productivity in services.
• Discuss and provide at least three reasons for the existence of economies of scale.

Answer 1

Differences

Goods are tangible and can be stored while services are intangible hence cannot be stored.This makes productivity of services to be higher than that of goods

Services are highly perishable and cannot be separated from the provider while goods are not all perishable hence their possession can be changed(Kendrick,2020).Productivity of services are highly perishable hence require high demand for consumption unlike goods

Value of goods change overtime and can be stored while production in services has their value not changing and cannot be stored.

Factors that help to improve productivity in services

i)Level of technology;With technology improvement, the services availed in the industry will satisfy the consumers since it will be efficient,fast and reliable.Technology that is outdated reduces services availability reducing the productivity levels

ii)Availability of inputs of production;Labor should be readily available to improve productivity of the services.The higher the labor force, the more consumers of the service will be demanded and vice versa.

Reasons for the existence of economies of scale

1.Specialization

When employers are able to specialize in specific tasks within a firm, they improve their skills hence the average unit produced within the firm is at a lower cost(Anandi,2019).

2.Efficient Capital

Efficient machines improve production within the firm.Large scale firms maximizes production through using the efficient machines which leads to lower production cost per unit.Small scale producing firms utilize machines inefficiently hence they usually have higher production cost per unit.

Explanation:

Productivity is a measure of output per unit of input.Productivity of goods and services are different in terms of perishable,tangibility and value and storage.

Economies of scale are the advantages that a firm enjoy when producing in large scale.Specialization and efficient capital factors causes economies of scale within the industry which benefits firms when producing in large scale.