9th

Grade

The Concept of Productivity

 Productivity
Productivity is the efficient use of factors
of production.
What are
Factors of
Production?

Land
Labor
Capital
Entrepreneurship
What does Table
7.3 shows us?

As more workers were

added to production, the
increment in total product
and the marginal product
went up at an increasing
rate.
 Effects of Productivity

Productivity brings down Productivity also

the cost of production enhances the firm’s
profitability
 9th
Grade

The Law of Diminishing Marginal

Returns
 Diminishing
Marginal Returns
The law of diminishing marginal returns is a
theory in economics that predicts that after
some optimal level of capacity is reached,
adding an additional factor of production will
actually result in smaller increases in output.
Understanding Diminishing Marginal
Returns

• This law affirms that the addition of a larger

amount of one factor of production, 
ceteris paribus, inevitably yields decreased per-
unit incremental returns.
Understanding Diminishing Marginal
Returns

• The law does not imply that the additional unit

decreases total production, which is known as 
negative returns; however, this is commonly the
result.
What do we do?
Innovation is the key!
Innovations may take place in any of
the following forms:

• Division of labor and engaging in specialization

• Acquiring and using the best technology
available
• Increasing the number and/or upgrading the
quality of inputs
Innovations may take place in any of
the following forms:

• Retraining personnel
• Restructuring of the organization
• Changing of management and marketing
approach
• Granting nonmonetary incentives to personnel
Innovations may take place in any of
the following forms:

• Trying out alternative inputs

• Moving the business to a new market