Factors

The eight main factors that affect productivity are:
Technical factors,
Production factors,
Organizational factor,
Personnel factors,
Finance factors,
Management factors,
Government factors, and
Location factors.

Now let's discuss briefly above listed important factors that affect productivity.

Technical factors : Productivity largely depends on technology. Technical factors are the most important ones. These include proper location, layout and size of the plant and machinery, correct design of machines and equipment, research and development, automation and computerization, etc. If the organization uses the latest technology, then its productiveness will be high.

Production factors : Productivity is related to the production-factors. The production of all departments should be properly planned, coordinated and controlled. The right quality of raw-materials should be used for production. The production process should be simplified and standardized. If everything is well it will increase the productiveness.
Organizational factor : Productivity is directly proportional to the

organizational factors. A simple type of organization should be used. Authority and Responsibility of every individual and department should be defined properly. The line and staff relationships should also be clearly defined. So, conflicts between line and staff should be avoided. There should be a division of labor and specialization as far as possible. This will increase organization's productiveness.

Personnel factors : Productivity of organization is directly related to personnel factors. The right individual should be selected for suitable posts. After selection, they should be given proper training and development. They should be given better working conditions and work-environment. They should be properly motivated; financially, non-financially and with positive incentives. Incentive wage policies should be introduced. Job security should also be given. Opinion or suggestions of workers should be given importance. There should be proper transfer, promotion and other personnel policies. All this will increase the productiveness of the organization.

Finance factors : Productivity relies on the finance factors. Finance is the life-blood of modem business. There should be a better control over both fixed capital and working capital. There should be proper Financial Planning. Capital expenditure should be properly controlled. Both over and under utilization of capital should be avoided. The management should see that they get proper returns on the capital which is invested in the business. If the finance is managed properly the productiveness of the organization will increase.

Management factors : Productivity of organization rests on the management factors. The management of organization should be scientific, professional, future-oriented, sincere and competent. Managers should possess imagination, judgement skills and willingness to take risks. They should make optimum use of the available resources to get maximum output at the lowest cost. They should use the recent techniques of production. They should develop better relations with employees and trade unions. They should encourage the employees to give suggestions. They should provide a good working environment, and should motivate employees to increase their output. Efficient management is the most significant factor for increasing productiveness and decreasing cost.

Government factors : Productivity depends on government factors. The management should have a proper knowledge about the government rules and regulations. They should also maintain good relations with the government.

Location factors : Productivity also depends on location factors such as Law and order situation, infrastructure facilities, nearness to market, nearness to sources of raw-materials, skilled workforce, etc.

Protectionism refers to policies, rules and regulations that help a nation place barriers in the form of tariffs while trading with any other country. It is sometimes also a ploy by a country to safeguard the interests of its domestic producers as cheap imported commodities tend to shut down factories making that commodity inside the country.
     One of the easiest ways to reduce imports of commodities is to raise the price of imports by putting in place tariffs. This helps domestic producers as they remain competitive in the      domestic markets. Other ways of protectionism are to place quota restrictions on commodities so that the quantity entering the country is miniscule which does not affect local producers.

The concept of Free trade on the other hand refers to a situation where there are no barriers in trade between two countries. This not only helps both the nations, it also paves the way for cooperation and trade in more areas and removing mistrust and ill will that is always there in an atmosphere riddled with sanctions, tariffs and embargos. Free trade does not take place overnightand this is why nations are entering into economic pacts and agreements to slowly and gradually remove all such artificial tariffs. Free trade encourages transparency and healthy competition. Nations have come to realize that otherscan be superior to them in production of certain goods and services while they can be superior in other areas.

The trades cycle or business cycle are cyclical fluctuations of an economy. A full trade cycle has got four phases: (i) Recovery, (ii) Boom, (iii) Recession, and (iv) depression. The upward phase of a trade cycle or prosperity is divided into two stages—recovery and boom, and the downward phase of a trade cycle is also divided into two stages—recession and depression.

(1)Recovery: In the early period of recovery, entrepreneurs increase the level of investment which in turn increases employment and income. Employment increases purchasing power and this leads to an increase in demand for consumer goods. As a result, demand for goods will press upon their supply and it shall, thereby, lead to a rise in prices. The demand for consumer's goods shall encourage the demand for producer's goods. The rise in prices shall depend upon the gestation period of investment. The longer the period of investment, the higher shall be the price rise. The rise of prices shall bring about a change in the distribution of income. Rent, wages, interest do not rise in the same proportion as prices.
   Consequently, the margin of profit improves. The wholesale prices rise more than retail prices. The prices of raw materials rise more than the prices of semi-finished goods and the prices of semi-finished goods use more than the prices of finished goods.

(2)Boom: The rate of investment increases still further. Owing to the spread of a wave of optimism in business, the level of production increases and the boom gathers momentum. More investment is possible only through credit creation. During a period of boom, the economy surpasses the level of full employment and enters a stage of over full employment.

(3)Recession: The orders for raw materials are reduced on the onset of a recession. The rate of investment in producers goods industries and housing construction declines. Liquidity preference rises in society and owing to a contraction of money supply, the prices falls. A wave of pessimism spreads in business and those markets which were sometime before sellers markets become buyer’s markets now.

(4)Depression: The main feature of a depression is a general fall in economic activity. Production, employment and income decline. The prices fall and the main factor responsible for it is, a fall in the purchasing power.

National income

National income

National income is the total value a country’s final output of all new goods and services produced in one year. Understanding how national income is created is the starting point for macro economics.
    In accounting terms, only the value of final output is recorded. To avoid the problem of double counting, only the value of the final stage, the retail price, is included, and not the value added in all the intermediate stages - the costs of production, plus profits.  In short, national income is the value of all the final output of goods and services produced in one year.

Economic Concepts

http://economicsconcepts.com/laws_of_returns.htm

Production Function

Production function:-

The production function expresses a functional relationship between quantities of inputs and outputs. It shows how and to what extent output changes with variations in inputs during a specified period of time. In the words of Stigler, “The production function is the name given to the relationship between rates of input of productive services and the rate of output of product.It is the economist’s summary of technical knowledge. Algebraically, it may be expressed in the form of an equation as
Q=f (L,M,N, К, T)…………. (1)
where Q stands for the output of a good per unit of time, L for labour, M for management (or organisation), N for land(or natural resources), К for capital and T for given technology, and F refers to the functional relationship. The production function with many inputs cannot be depicted on a diagram. Moreover, given the specific values of the various inputs, it becomes difficult to solve such a production function mathematically. Economists, therefore, use a two-input production function. If we take two inputs, labour and capital, the production function assumes the form
Q = f (L, K) ….(2)
The production function as determined by technical conditions of production is of two types:
It may be rigid ox flexible. The former relates to the short run and the latter to the long run.
The Nature of Production Function:
The production function depends upon the following factors:
(a) The quantities of inputs to be used.
(b) The state of technical knowledge.
(c) The possible processes of production.
(d) The size of the firm.
(e) The prices of inputs.
Now if these factors change the production function automatically changes.

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