Production is the process of creating, growing, manufacturing, or improving goods and services.

Productivity measures the efficiency or rate of production. It is the amount of output (e.g. number of goods produced) per unit of input (e.g. labor, equipment, and capital).

Labour productivity measures the amount of output per worker

Factors Influencing Productivity

  • Technology
  • Skills and experience of the labour force
  • Motivation
  • Quality of factors of production
  • Division of labour
  • Investment

Productive Capacity

This looks at the amount a firm is producing compared with how much it could be producing given existing resources. To increase capacity utilisation can increase production levels.

There is a need to ensure there is demand for the excess production. If they produce more need to increase demand by:

  • Increased promotion
  • Altering elements of the marketing mix to increase demand
  • Producing products for other firms (sub contracting)
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