Productivity Investment, economic growth, and standard of living

Productivity Inputs: –Resources used to produce a something Money, time, energy, manpower, natural resources Outputs –What is produced by using inputs Goods, services Productivity is measured by dividing output by the number of inputs to produce the outpot More productivity = –More output (products) with same inputs (resources) –Same output with less inputs

What increases productivity? INVESTMENT!!!! –Capital Goods Equipment and machines that help your business produce more efficiently –Human capital Education and training that make your employees produce more efficiently Investments in capital goods and human capital cause economic growth More output = economic growth

Effects? When a business increases productivity, it makes more profit and grows When a country increases productivity, its people enjoy a higher standard of living

Rational Decision-Making Marginal Cost: ADDITIONAL cost of adding more inputs (resources) Cost of hiring one more worker Cost of buying one more machine Marginal Benefit: ADDITIONAL benefit of adding more inputs Extra profit the extra worker brings your business Extra profit the machine brings your business Rational Decision Making: When marginal benefits exceed marginal costs