Labour / Capital Intensive

Labour / Capital Intensive

Labour intensive - this is where the proportion of labour used in producing the product is relatively high. Labour will usually be used instead of capital. production in which a large amount of labour is used relative to capital. For example, window-cleaning or brick-laying are labour-intensive jobs. Service industries tend to be far more labour-intensive than either primary or secondary industries.

Capital intensive - this is where techniques are used to produce that use relatively more capital than labour. Many industries are now like this including the car and steel industries. Production in primary and secondary industrial sectors has become increasingly capital-intensive. As more and more capital is used, labor productivity increases, but at the same time employment in these industries falls.

The technique that a company uses depends on several things:

      the size of the company - small companies are often not in a position to afford expensive capital equipment. Even if they could they are often not able to use it enough to justify the cost.

      the cost of the factors of production - even though a machine may be available to do the job, it may not be worthwhile if the amount of labour required costs less. Firms therefore look carefully at the cost of labour and capital before deciding how much to use.

      the product - some products lend themselves better to being produced by capital than others. Mass-produced everyday items are far more likely to be produced in a capital-intensive way, whereas services and products with a more individual slant are more likely to be produced using a large proportion of labour.

Why some business use Labour intensive technique??

1. Labour-intensive processes are those that require a relatively high level of labour compared to capital investment.
2. These processes are more likely to be used to produce individual or personalised products, or to produce on a small scale
3. It requires very less capital investment,
4. Manual labour is given more importance then the machinery.

Why some business use Capital  intensive technique??

1.       Capital-intensive processes are those that require a relatively high level of capital investment compared to the labour cost.

2.       These processes are more likely to be highly automated and to be used to produce on a large scale.

3.       Capital-intensive production is more likely to be associated with flow production (see below) but any kind of production might require expensive equipment.

How can firms raise the productivity of its labour?

How can firms raise the productivity of its labour?

1. Training workers to improve their existing skills & learn new skills.
2. Rewarding increased productivity with performance related pay & bonus payments.
3. Encouraging employees to buy shares in their organization. Improved productivity will help to raise profit & pay higher dividend on shares.
4. Improving satisfaction-for example, by improving working environment, making job more interesting, involving workers in business decision making etc.
5. Replacing old plant & machinery with new, more efficient machines and tools for workers.
6. Introducing new production processes and working practices designed to continually reduce waste, increase speed, improve quality and raise output in all areas of a firm. This is often known as lean manufacturing but its principles can equally apply to the production of service.

SPECIALIZATION,ADVANTAGES AND DISADVANTAGES

What is Specialisation?

Through years, production has developed into a complicated process and thus broken down into a series of highly specialised task. Each task is then performed by a worker. This is known as Division of Labour.

Advantages of Division of Labour

·         Practise makes perfect: Worker specialises in a particular task and gives in the best, thus producing goods faster and less wastage of material. (FASTER)

·         Use of machinery: Specialised machinery can be used which is further increase the productivity.

·         Increased Output: with improvement in efficiency and use of machinery output is increased.

·         Saves time: There is no time wasted in switching of jobs and thus the momentum of production can be maintained which leads to less wastage of time.

Disadvantages of Division of Labour

·         Boredom: Performing the same task over and over again may lead to boredom for the workers.

·         Lack of variety: Though the number of goods produced increases but they are identical or standardized.

·         Low motivation for worker: Repeatedly performing the same task may lead to low motivation level for the worker. The worker might not have the sense of fulfilling a complete task as he is performing only a part of the job.

·         Lack of mobility: Due to specialisation workers might find it difficult to switch between occupations.

·         ADVANTAGES OF SPECIALISATION / DIVISION OF LABOUR

·         To the business:

·         - Specialist workers become quicker at producing goods
- Production becomes cheaper per good because of this
- Production levels are increased
- Each worker can concentrate on what they are good at and build up their expertise

·         To the worker:

·         - Increases productivity

·         Higher pay for specialised work
- Improved skills at that job.

·         DISADVANTAGES OF SPECIALISATION / DIVISION OF LABOUR

·         To the business:

·         - Greater cost of training workers
-Quality may suffer if workers become bored by the lack of variety in their jobs

·         To the worker:

·         - Boredom as they do the same job
- Their quality and skills may suffer
- May eventually be replaced by machinery

·          

3 Basic Economic Questions - Notes

What to produce?

What goods and services to produce: Does the economy uses its resources to operate more hospitals or hotels? Do we make iPod Nanos or produce more coffee? Does the National Health Service provide free fertility treatment for thousands of couples without children?

How to produce?

How best to produce goods and services: What is the best use of our scarce resources of land labour and capital? Should school playing fields be sold off to provide more land for affordable housing? Or are we contributing to the

problem of obesity by selling off these playing fields?

For whom to produce?

•Who is to receive goods and services: What is the best •method of distributing products to ensure the highest level •of wants and needs are met? Who will get expensive hospital •treatment - and who not? Should there be a minimum wage? •If so, at what level should it be set?

Factors of Production

Dear grade 8E students,

Solve this worksheet and show me in the next class.

Chapter 1 Factors of Production

Directions: Classify each of the Factors of Production listed below as either a Land (natural) resource, a Labor (human) resource, a capital resource, or an entrepreneurial resource. Place a check mark (ü ) in the appropriate box on the right to indicate your choice. The first one has been done for you.

	Land (Natural Resources)	Labor (Human Resources)	Capital	Entrepreneurial
Tree	ü
Office Building
Water
Magazine Publisher
Teacher
Oil Rig
Corporate Manager
Fish
Bus Driver
Automated Teller Machine
Small Business Owner
Tractor
Construction Worker
Printing Press
Fertile Land
Henry Ford
Farmer