Labour & Capital-intensive Production | Economics for GCSE/IGCSE - Year 11 PDF Download

The Distinction Between Capital- & Labour-intensive Production

• A firm's production can be categorized as either labor-intensive or capital-intensive.
• Labor-intensive production implies that labor costs represent a higher proportion than other factors of production, including machinery.
• Capital-intensive production, on the other hand, indicates that the proportion of machinery costs outweighs those of other factors of production, including labor.

Choosing Between Capital- & Labour-intensive

• When firms decide how to produce goods/services efficiently, they weigh the advantages and disadvantages of capital and labor-intensive production based on the nature of their product or service.
• Some industries opt for labor-intensive production, employing a large workforce, especially when tasks require technical skills that are hard or costly to automate. For instance, this is evident in professions like teaching or garment manufacturing.

The Advantages & Disadvantages Of  Labour-Intensive Production

• In certain industries, there's a trend towards being more capital-intensive, gradually substituting labor with capital when it becomes economically viable to do so. As wages increase in a country, there's a tendency for more labor to be supplanted by machinery.
• Ongoing advancements in technology and process innovation prompt firms to continuously assess the feasibility of transitioning from labor-intensive to capital-intensive production.

The Advantages & Disadvantages Of  Capital-Intensive Production