What is productivity and efficiency and why it is important

Productivity is the measurement of the amount of output a unit of input could produce. They are measured using the following formulas

Efficiency describes how effective productivity is. The more efficient the firm is, the more productive it becomes, increasing productivity. As productivity increases, output increases, increasing revenue when more output are sold. This increase profits when revenue increases or when cost reduces from better efficiency.

RELATED CONCEPTS

1. Revenue

2. Output

PAST YEAR QUESTIONS

1. Identify and explain two possible benefits to a firm on improving efficiency (6 marks) Oct/Nov 2018/12.

2. Do you think all manufacturing businesses should use recycled materials? Justify your answer. (6 marks) May/June 2020/13

3. Which option for increasing output do you think a firm should choose? Justify your answer using the information in Table 1. (6 marks) Oct/Nov 2019/13