Firms use some combination of labor and capital to produce output

Firms use some combination of labor and capital to produce output

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Firms use some combination of labor and capital to produce output. In particular, the labor utilizes the capital in the production process. For example, when making cars, workers use tools and an assembly line to produce a finished product. The workers are the labor and the machines are the capital. In order to increase productivity, each worker must be able to produce more output. This is referred to as labor productivity growth. The only way for this to occur is through an in increase in the capital utilized in the production process. This increase can be in the form of either human capital or physical capital. An example will help to illustrate the basic way that labor productivity growth works through increases in the capital stock. Say there is a riveter named Joe. Joe works in a factory that makes metal boxes that are riveted together. He has a riveting tool that can factory that makes metal boxes that are riveted together....
View Full Document

This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

Ask a homework question - tutors are online