Chapter 20: Problem 3

Are there other ways in which we can measure productivity besides the amount produced per hour of work?

Short Answer

Expert verified

Aside from the amount produced per hour of work, there are other ways to measure productivity. These include output per worker, which is calculated as total output divided by the number of workers; multifactor productivity, which considers multiple factors such as labor, capital, and materials; total factor productivity, which reflects the influence of technology and innovation on productivity; and value-added per worker, which measures the value a worker creates by subtracting the cost of raw materials and intermediate inputs from the total output. These alternative methods provide a more comprehensive view of a company's or industry's efficiency in producing goods or services.

Step by step solution

1. Define productivity

Productivity is a measure of the efficiency of a person, machine, factory, or system, in converting inputs into useful outputs. It is often calculated as the ratio of the output to the input. While "amount produced per hour of work" is a common measure of productivity, there are other ways to evaluate productivity.

2. Output per worker

Output per worker is another way to measure productivity. This method considers the total output produced by a company or an industry, divided by the number of workers involved. It helps businesses compare the efficiency of their workers in creating products or services. To calculate output per worker, use the following formula: \[ \text{Output per worker} = \frac{\text{total output}}{\text{number of workers}} \]

3. Multifactor productivity

Multifactor productivity (MFP) is a measure that takes into account multiple factors, including labor, capital, and materials, to calculate the productivity of a company or industry. MFP considers how efficiently these various inputs are combined to produce output. It can be calculated using the following formula: \[ \text{MFP} = \frac{\text{total output}}{\text{weighted sum of inputs (labor, capital, materials)}} \]

4. Total factor productivity

Total factor productivity (TFP) refers to the overall efficiency of a production process by reflecting the influence of technology, innovation, and organization on productivity. TFP can be calculated by dividing the total output by the combined input of labor and capital. To measure TFP, use the following formula: \[ \text{TFP} = \frac{\text{total output}}{\text{total input (labor + capital)}} \]

5. Value-added per worker

Value-added per worker is a measurement of productivity by the value that a worker is responsible for creating. It measures how much value (revenue or output) is created per worker by subtracting the cost of raw materials and intermediate inputs from the total output. To calculate value-added per worker, use the following formula: \[ \text{Value-added per worker} = \frac{\text{total output - cost of inputs}}{\text{number of workers}} \] Overall, there are many different ways to calculate productivity besides the amount produced per hour of work. These alternative methods can offer a more comprehensive view of a company's or industry's efficiency in producing goods or services.