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Econ Videos 79 videos

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Econ: What is Productivity? 0 Views


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What is Productivity? Productivity is a calculation ratio of the total amount of units made, delivered or accounted for based on the total number of work hours devoted to those units. On a macroeconomic basis, it is the ratio of Gross Domestic Product (GDP) to man hours of work.

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Transcript

00:00

And finance Allah Shmoop What is productivity Oh all right

00:07

people let's just jump into this one with an example

00:10

You make delicious dog muffins not muffins made out of

00:14

dog sick people Muffins for four dogs Your dogs love

00:18

them Friends always ask you to make the muffins for

00:20

their dogs And sometimes you suspect some of your friends

00:23

are actually eating the muffins themselves Bob we're looking at

00:26

you But whatever making these muffins is you know kind

00:29

of your thing So you decide to start a dog

00:31

muffin making business you by big bags of all the

00:34

ingredients and flour sugar butter salt dog food kale cumin

00:38

liverwurst and you know a special secret ingredient You can't

00:42

tell people at first While it's just you working out

00:44

of your kitchen you can make two batches of muffins

00:47

and our orders start coming in more orders than you

00:50

can handle You need to make more muffins Teo You

00:52

know really grow the business Main problem Your mixer You

00:55

have this old tiny mixer that you got when Aunt

00:57

Sally died Trying to climb the Matterhorn Sentimental value aside

01:01

you need to upgrade the mixer If this business is

01:04

going to take off So you take some of your

01:06

profits and you buy an industrial mixer Unfortunately you can't

01:10

get elves to do things for you but we'll talk

01:12

about more about getting helpers and a bit non union

01:14

elves What you seek for now let's just upgrade your

01:17

mixer Now you could make bigger batches of dough with

01:19

no extra work which means you could make more muffins

01:23

Well you discover that with the new mixer you can

01:25

make four batches an hour and you just improved productivity

01:29

there Still just one of you though You still spend

01:32

just one hour working but you made four batches instead

01:35

of two You improved productivity by one hundred percent You

01:39

know productivity A professional obstetrician for waterfowl or a professional

01:44

actor in native ity pageants who happens to be a

01:47

duck You know Hamilton really opened up the options for

01:49

casting Well of course there's the economic concept of productivity

01:53

We suppose we should talk about that one for a

01:55

little bit Okay that leads us to the title card

01:57

here Pro activity like productivity measures how much stuff you

02:01

can make with the labour you put into it It's

02:03

sort of about how you leverage technology and or machinery

02:07

to make the efforts of mankind be worth the more

02:11

When you do something that lets you make more stuff

02:14

with the same amount of labour that's an improvement in

02:18

productivity This Khun B new technology you know like the

02:21

upgraded mixer here Or it could be a new process

02:24

like Think Henry Ford's Model T assembly line thing Need

02:28

more Alright to show you what we mean Let's step

02:31

into our time machine for a sex Hundreds of years

02:33

ago to make a shirt one person would spend months

02:36

weaving and sewing one shirt at a time Then the

02:40

Industrial Revolution happened People started to use machines to do

02:43

a lot of the work They could make hundreds of

02:45

shirts in the time it used to take them to

02:47

make one shirt This process has continued regularly over the

02:51

past couple hundred years More machines allowing fewer employees to

02:54

make more and more shirts or cars or dog muffins

02:57

or you know whatever And this process of improvement continues

03:01

today as a I R Artificial intelligence and automation improves

03:05

factories which then need fewer and fewer employees While still

03:09

making more and more cards and stuff right Maybe the

03:12

robots are preparing to take over Maybe but for now

03:15

we get all that stuff Yeah back to your muffin

03:18

growing business Your dog muffins remain a big hit Even

03:22

with the improved productivity you still get more orders than

03:24

you can handle You've got the big industrial mixer You

03:27

still have room in your oven The problem While you

03:30

just can't get work fast enough getting all the ingredients

03:33

doing the cooking sorting through the orders Well there's just

03:36

no way to make more than four batches an hour

03:38

if it's on ly you the sole proprietor doing all

03:41

this stuff Well the fix you hire a helper Well

03:44

now you just doubled your output again You collectively together

03:48

you two you're making eight batches an hour But you

03:51

didn't change the productivity of your business Instead you just

03:55

added employment or another body There's two humans working now

03:58

One two That's it So you were able to go

04:00

from four batches an hour Tow eight But productivity remain

04:04

the same The ratio one human four batches So here

04:07

let's break down the math for a minute and we'll

04:08

show you how productivity stayed Same Yep You're working one

04:11

hour And your assistant or else there is working the

04:14

same hour So total hours work too The finance world

04:18

Well these air known as man hours Or maybe it's

04:21

more PC to calm people hours or human hours It's

04:23

a measure of how much labor gets put into a

04:26

product to humans Each working one hour is too Well

04:30

just call him man hours Yeah So to get productivity

04:32

divide output by man hours and you've got eight batches

04:35

and then you've got two men ours Divide output by

04:37

the amount of hours worked and you get four batches

04:40

an hour Well your output per man hour is still

04:43

the same as it was when it was just you

04:46

You increase the output because you increase the labour you

04:48

put into it Employment went up productivity stayed the same

04:51

Your business And while it continues to expand along the

04:54

way you make improvements to increase productivity new equipment better

04:58

processes Meanwhile you also add to employment you know hiring

05:02

new workers to increase output even more And why is

05:04

this such a big thing Well if you have to

05:07

hire lots and lots of workers to put out more

05:09

product Your profit margins aren't going to go up like

05:12

when you have a machine that does the same repetitive

05:14

motion again and again and again Usually the cost of

05:17

power That machine is just the electricity or whatever in

05:19

a little bit of maintenance and cleaning And that's it

05:21

Where is when you have a human being Particularly lots

05:24

of them Well they want raises and benefits and they

05:27

unionize and then stop If you don't do everything they

05:30

want them to dio any profit margins Well then kind

05:33

of stay the same or go down It's a tough

05:34

tough slog So machinery in this sentence is your friend

05:37

and you have to love it or well you know

05:40

it won't love you back now The only thing you

05:42

need to worry about well keeping your secret ingredient a

05:44

secret Well OK two things to worry about there Someday

05:47

the very near future There might be a robot coming

05:50

for your job You know what We're betting on it 00:05:52.724 --> [endTime] Actually

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