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Why is high productivity important for a nation?

Why is high productivity important for a nation?

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter3: Scarcity, Trade-offs, And Production Possibilities
Section: Chapter Questions
Problem 11P
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1. Why is high productivity important for a nation?

2. Why do you suppose that service jobs have lower productivity than manufacturing jobs?

3. How can a company gain a competitive advantage by having higher productivity than its competitors have?

READING WHY PRODUCTIVITY MATTERS It is sometimes easy to overlook the importance of productivity. National figures are often reported in the media. They may seem to be ho-hum; there's nothing glamorous about them to get our attention. But make no mistake; they are key economic indicators- barometers, if you will, that affect everybody. How? High productivity and high standard of living go hand-in-hand. If a country becomes more service-based, as the United States has become, if some (but not all) high-productivity manufacturing jobs are replaced by lower-productivity service jobs, that makes it more difficult to support a high standard of living. Productivity gains can offset inflationary pressures related to wage increases. Productivity increases result in lower costs per unit. Those savings not only generate higher profits, they also help pay for wage increases. Productivity levels are also important for industries and companies. For companies, a higher productivity relative to their competitors gives them a competitive advantage in the marketplace. With a higher productivity, they can afford to undercut competitors' prices to gain market share or charge the same prices but realize greater profits! For an industry, higher relative productivity means it is less likely to be supplanted by foreign industry.
Transcribed Image Text:READING WHY PRODUCTIVITY MATTERS It is sometimes easy to overlook the importance of productivity. National figures are often reported in the media. They may seem to be ho-hum; there's nothing glamorous about them to get our attention. But make no mistake; they are key economic indicators- barometers, if you will, that affect everybody. How? High productivity and high standard of living go hand-in-hand. If a country becomes more service-based, as the United States has become, if some (but not all) high-productivity manufacturing jobs are replaced by lower-productivity service jobs, that makes it more difficult to support a high standard of living. Productivity gains can offset inflationary pressures related to wage increases. Productivity increases result in lower costs per unit. Those savings not only generate higher profits, they also help pay for wage increases. Productivity levels are also important for industries and companies. For companies, a higher productivity relative to their competitors gives them a competitive advantage in the marketplace. With a higher productivity, they can afford to undercut competitors' prices to gain market share or charge the same prices but realize greater profits! For an industry, higher relative productivity means it is less likely to be supplanted by foreign industry.
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