Relationship Between Economics And Productivity

As defined, physical productivity is the quantity of output produced by one unit of production input in a unit of time. In layman’s terms, perhaps an equipment that can produce 10 tons of output per hour.

Economic productivity, alternatively, is the value of output acquired from one unit of input. For instance, if a worker produces an manufacture of 2 units in an hour (with a price of $ 10 each), his productivity is $ 20.

Both technological and market elements (output quantities and prices, respectively) interact with each other to work out economic productivity.


One gets the standard economic productivity by dividing output value and (time or physical) units of input. In addition, if the production process uses just one factor (labour, as an example), the procedure gives the productivity name of that factor. (In this case, labour productivity).

If there is more than one input employed for each factor, it's workable to work out by the same procedure its productivity. (In this case, it's termed “partial”.)

Total factor productivity tries to construct a productivity measure that'll encompass an aggregation of factors. How it signifies is still under hypotheses. Therefore, not yet assured in a general framework.


To date, it'd been determined by current technology that the most physical quantity of output may be reached country together with the number and excellence of inputs needed.

Successively, adopted technology is an economic choice. Today’s huge range of concurrent technologies is influenced by available innovations and compatibility with the adopter.
Most can't be reversed as a consequence of the price of switching.


Technological changes sometimes happen fast in some industries while in many others the changes are more gradual. Technology, still, always improves.

Economic productivity will depend on pricing and necessity. If the consumers need less items that can be produced potentially, plants won't work at full productive capacity. Economic productivity can fall together with decreasing demands and prices.

At the macro-economic level, labour productivity ( gross domestic product per worker) relies on the related dynamics of two reasons: GDP and employment. In short, productivity rises if the gross domestic product ( gross domestic product) increases quicker than employment.

Productivity increase

Many reasons help buoy up productivity increase. They include capital accumulation via investments, dissemination of new technologies, domestic innovative efforts, enhanced division of work, higher levels of education, organizational and technological production modes from world-class models. The growth of physical and social infrastructures,

Impacts of productivity increase

Higher productivity will first make its presence on profits and ultimately on people’s wages. If production costs don't exceed productivity increase, there is a prospect of a price fall or stability. it's in addition conducive to reduce inflation.

In other countries, productivity has grown. In rich countries, gross domestic product soared mainly owing to the rise in productivity. The poorest countries internationally are normally with a low productivity increase.

So far, there is a marked inter-relationship between grow productivity and [the rise of the increase of] gross domestic product at all levels: country-wide, companies, organizational groups, even on to the individual himself.

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