EPF2f. How Increased Productivity
Affects Costs of Production & Standard of Living
Role of Producers & Consumers
in a Market Economy
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Increased productivity leads to:
• Reduced costs of production • Higher standards of living
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WHAT IS PRODUCTIVITY?
Essential question:
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Productivity
• Refers to output per worker• Measured by dividing output
(goods & services) by the number of inputs used to produce the output
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WHAT IS AN INCREASE IN PRODUCTIVITY?HOW DO INCREASES IN PRODUCTIVITY AFFECT COSTS OF PRODUCTION?
Essential question:
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An increase in productivity occurs when:
• The same output can be produced with fewer resources
• Since fewer resources are used, costs of production are reduced
• For example, Henry Ford introduced the assembly line, cars could be build with many fewer man-hours, an increase in productivity. Because less was spent on labor, the cost of production went down, the prices of cars went down , and more cars were sold.
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WHAT IS ECONOMIC GROWTH?
Essential question:
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Economic Growth
• A sustained rise in a nation’s production of goods and services• Economic growth is measure by real
Gross Domestic Product
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WHAT IS GROSS DOMESTIC PRODUCT?
Essential question:
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Gross Domestic Product (GDP)
• A basic measure of a nation’s economic output and income.• It is the total market value, measure
in dollars, of all final goods and services produced in the economy in one year.
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WHAT IS GROSS DOMESTIC PRODUCT PER CAPITA?
Essential question:
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Real GDP per capita
• The measure most often used to measure standard of living
• Calculated by dividing a nation’s real GDP by its population
• It is what each person’s share of the total output of a country was divided equally among its citizens
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WHAT IS STANDARD OF LIVING?
Essential question:
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Standard of Living
• A measure of an individual's or a family's quality of life
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HOW DOES ECONOMIC GROWTH AFFECT STANDARD OF LIVING?
Essential question:
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Economic growth affects standard of living
• As the productivity of labor improves, an economy grows, real GDP per capita increases, and standard of living rises• Economic growth has been the
vehicle for alleviating poverty and raising the standard of living
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