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What is productivity and efficiency and why it is important

Updated: Jun 18, 2023

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


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