Amount produced divided by the resources used, is the calculation that helps to determine which producer has the absolute advantage.
The performances of a company’s production process measures its productivity.
Further Explanation
Productivity of a company is calculated by dividing its output and the input that are used in the process of production. Common inputs in this case can be natural or capital resources and labor hour, while output are measured by the sales or amount of goods produced by the company.
Productivity can be calculated by the amount of unit produced by a company relative to its labor hour or by measuring the company’s revenue relative to employee labor hours.
However, the overall labor productivity can be calculated by dividing the goods and services a company produced by the employee total hour during a particular period of time.
In a situation where a company had an output of 4,000 units in a month and its input was 4,000 hours of labor, the productivity for such company is 10. This implies the output (40000) is divided by the labor input (4,000), which is equals to 10. This also means that the number of units produced by the employee per hour is 10 in the previous month.
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KEYWORDS:
- productivity
- company's output and input
- labor
- goods and services
- employee
