Productivity and Long-Run Aggregate Supply Flashcards

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What does productivity mean in economics?

How much output is made per unit of input, such as per worker or per hour.

What is labour productivity?

The output made by each worker in a set time, usually per hour.

How do you calculate labour productivity?

Divide total output by total hours worked.

A factory makes 600 toys with 5 workers in 5 hours. What is labour productivity per worker per hour?

600 ÷ (5 × 5) = 24 toys per worker per hour.

What does Long-Run Aggregate Supply (LRAS) show?

The economy’s maximum output when resources are fully used and efficient.

In diagrams, what is the shape of the LRAS curve?

Vertical, showing potential output is fixed by resources and productivity.

How does higher productivity affect LRAS?

It shifts LRAS to the right, because the same resources can produce more.

Why does higher productivity lower unit costs?

Each worker makes more output, so the cost per unit falls.

How does productivity growth affect long-run economic growth?

It raises potential output, increasing long-run growth.

What is the difference between production and productivity?

Production is total output made. Productivity is output per input, such as per worker per hour.