Productivity is a measure of the efficiency of production. It can be defined as a ratio of what is produced to what is required to produce it. In other words, it is a measure of output per unit of input. When productivity increases, it means that more output is produced with the same amount of input, thus reducing the cost of production.
Productivity is often measured in terms of labor productivity, which is the ratio of output to the number of workers used in the process. The most common measure of labor productivity is Output per hour worked. This measure is calculated by dividing the total output of a process by the total hours worked in that process. For example, if a factory produces 100 widgets in 8 hours, its labor productivity would be 12.5 widgets per hour.
Another indicator of productivity is capital productivity. This is a measure of the quantity of output produced per unit of capital employed. This measure is usually expressed as a percentage, and it can be calculated by dividing the total output of a process by the total capital invested in that process.
Productivity can also be measured in terms of quality and product mix. Quality refers to the reliability and/or durability of a product or service as it relates to market and customer requirements, while product mix is a measure of the variety of products and services produced by a firm. For example, a firm that produces a large variety of products has a higher product mix than one that produces fewer products with fewer characteristics.
Productivity can also be measured in terms of materials or raw materials. Raw materials productivity is a measure of the quantity of output produced for each unit of raw materials used in a process. For example, if a company produces 200 widgets with 10 kilograms of raw materials, its raw materials productivity would be 20 widgets per kilogram.
Finally, productivity can be measured in terms of return on investment. This is a measure of the rate of return generated by a process relative to the amount of capital invested in that process. For example, if a firm invests $100 in a process that produces $200 of output, its return on investment would be 100%.
Productivity is an important measure of economic performance, and it is one of the key indicators of economic growth. Improving productivity can help reduce costs and increase profits, which in turn can lead to higher wages and more employment opportunities. Productivity can be improved through technological advancements, better management practices, and greater efficiency in production processes.
