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What is Productivity in terms of economics?

Productivity is basically a term used for the measurement of efficiency while production occurs. It’s usually the ratio of outputs to inputs in a process of production.

  • Total Productivity:

When all the outputs and inputs are included in a process of production.

  • Profit:

Difference between the outputs and the inputs in a particular production process.

Since, productivity is the measure of efficiency, this is definite that the objective is to maximise the profit with minimum of input. Both output and input plays major role in determining the economic productivity. It is also described by output produced per unit input.

How do we determine productivity?

The computation of average economic productivity is done by dividing output with a unit of input. Productivity can be determined as whole or just using one factor. When there’s more than one input, productivity can be calculated with the same procedure for each factor and would be called “partial” productivity.

Total factor productivity is the addition of all the values of productivity in each factor.

Factors effecting productivity:

  • Investments.
  • New technologies.
  • Pro-diffusion tax.
  • Imitations with world-class practices.
  • Worker’s division.
  • Co-ordination mechanism.
  • Transport services.
  • Involvement of workers.
  • Social infrastructure.
  • Communication networks.
  • Prices.
  • Demands.
  • Reputation.

Impacts of Productivity on other variables:

How can Productivity be increased?

There are various ways to increase productivity and those would be:

  • Better exploitation of existing employment, so that outputs per unit worker rises.
  • Incentives to the workers.
  • Observation and elimination of errors.
  • Enlarging employers per output and keeping productivity stable.

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