Chapter 9

•Production and Productivity

Gross Domestic Product

• GDP is the market value of all goods and services produced in a nation’s economy during a given time.

• It is made up of consumer, investment, and government spending.

Shortcomings of GDP

• Does indicate the size of a nation’s economy, but does not measure the well-being of a population.

• It cannot measure accurately changes in production from year to year.

Inflation

• A rise in prices, meaning, it costs more money to buy the same goods.

• Between 1960 and 1998, GDP rose 16x.

• However, there were not 16x more goods produced during that time period.

Productivity• Productivity is the output of goods and

services as measured per unit of input—time, workers, capital resources, etc.

• Labor Productivity is the amount the work force can produce in a given time.

• When productivity rises, people produce more with the same resources.

The Quality of Management

• New management ideas have been implemented over the last 100 years to improve productivity:

• Some of these ideas include customer satisfaction, high-quality workmanship, employee involvement, and shared vision.

Capital Resources

• The free enterprise system has given business owners incentive to risk more money on capital resources.

• The value of equipment per worker has risen 148% over the last 40 years!