The physical productivity is defined as the quantity of produced output by a unit of input production in a time unit. In simple terms, it can be understood as an equipment that could produce some tons of output in a hour.

Economic productivity, however, is the production value which is gained from an input unit. For instance, a worker produces two units output in one hour (at the price of 10 dollars for each unit), that means his productivity is 20 dollars.

Both market and technological elements (output prices and quantities) interact with each other to calculate economic productivity.

The Calculations

The economic productivity of a worker is calculated by dividing the output value and (physical or time) input units. Also, if the process of production just uses a factor (for example, labor), the procedure will give the name of this factor to the productivity. (Labor productivity).

In case there are two or more input which is used for every factor, it can be calculated by the same procedure as its productivity. (It is called “partial”).

The total factor productivity is to construct a measure of productivity including a combination of factors. It is still under hypothesis, and hence not yet a general framework.

The Indicators

It has been determined by the current technology that maximum physical production could be reached together by the quality and quantity of inputs.

In turn, the technology adopted is an economical choice. Current wide range of competing technologies is very influenced by the innovations available and the compatibility with adopter.

The Technology

At times technological changes happen rapidly in some sectors. In many other sectors, changes are even more gradual. That means technology always improves.

It is easy to see that economic productivity always depends on the demand and price. If consumers require fewer products which can be potentially produced, machines may not function at their full productive capacity. And then economic productivity could fall with the reducing of demand and price.

Labor productivity (aka gross domestic product per worker) completely depends on the dynamics of two following factors: the employment and GDP. Simply, productivity increases if GDP rises faster than employment.

The Increase of productivity

There are many factors that help increase productivity. These include the accumulation of capital through investment, the diffusion of new technologies, innovative national efforts, greater division of labor, higher education the development of social and physical infrastructure and the modes of organization and technological production of world-class models.

The Impacts of the Increase of Productivity

Greater productivity can present on the benefits and on the wages of the people ultimately. If the costs of production is no more than the increase of productivity, the price may be stable or even drop.

In rich countries such as USA, UK, Japan etc, GDP increased primarily due to the increase of productivity. The world’s poorest countries are usually with a low growth of productivity .

There is a strong inter-relationship between productivity increasing and GDP growth at all levels throughout the country, organizational groups, companies and even to the individual.

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