Productivity - Explore Economics Video Series

Yesterday Jackson watched a video about goods and services. He and his classmates made bookmarks with the letters of their first names on them. Bookmarks are goods.

Jackson had also watched a video about producers and consumers. He decided that if he produced these bookmarks, there might be a lot of consumers who would want them.

He decided to get some help from his cousin Ellie.

They gathered the inputs that they would need to produce bookmarks: sturdy card stock, scissors, markers, stencils, a hole punch and some ribbon.

Here’s the design for their bookmarks. People can order bookmarks with the first letter of their first or last names on them, they can choose the color for the bookmark, and the ribbon at the top.

Jackson and Ellie showed their sample bookmark to friends and family. Many people were interested in buying the bookmarks. They had orders for 24 bookmarks.

Things were going well until Ellie told Jackson that she was a faster bookmark producer. So, Jackson challenged her to a contest.

Jackson and Ellie set the alarm on their clock for one hour. They each worked for an hour producing bookmarks.  Each of them made a bookmark from start to finish—cutting the paper, drawing the letter and design, coloring the design, hole-punching and placing the ribbon. In one hour, they produced 6 bookmarks. That means that each of them produced 3 bookmarks per hour.

At the end of the hour, they talked about their work. Jackson said, “We each produced 3 bookmarks. That doesn’t seem like very many bookmarks to make in an hour. We need to increase our productivity.” An hour for each of them to produce 3 bookmarks seemed like a lot of time. They tried to think of ways that they could produce more bookmarks in the same amount of time—ways that they could increase their productivity.

Ellie asked, “What’s productivity?” Jackson responded, “It’s the amount of a good—the output—a person produces in a certain amount of time. For us, productivity was 3 bookmarks per worker per hour.”

“It’s output divided by input divided by time—in this case we are the inputs and the bookmarks are the output,” Jackson said as he wrote the formula on the board.

“Hmm, so it’s 6 bookmarks divided by 2 inputs—us, divided by the amount of time it took us—1 hour.” Ellie said, as she wrote the numbers on the board.

Ellie asked, “How can we increase our productivity?” Jackson said, “Maybe we can divide the work between us. Instead of each of us doing every task involved in producing bookmarks, one of us would do some things and the other would do other things.”

Jackson and Ellie set the alarm on their clock for one hour. For the next hour, Jackson cut the bookmarks, hole-punched the top, put the ribbon in and drew the large letter on each bookmark. Ellie spent her time drawing and coloring the design on each bookmark.

At the end of the hour, Jackson counted the number of bookmarks they produce—and they produced 8! Their productivity increased from 6 to 8 for the two of them or 4 bookmarks per person per hour. They were excited.

Jackson asked, “Are there things we could do to produce even more bookmarks in the same amount of time?”

Ellie said, “I have some letter stamps we could use to put the letters on the top.”

Jackson said, “We could have the same design on every bookmark.  They would still be colored differently. I have some stencils we could use to put the designs on.”

They decided to give it a try. But first Jackson practiced using the stamps and Ellie practiced using the stencils.

When they were ready, they set the alarm on their clock for one hour and started producing again using the stamps and stencils.

At the end of the hour, Ellie counted the number of bookmarks they produced.  “Jackson, Ellie said, we produced 12 bookmarks in an hour! That’s 6 bookmarks per person per hour.”

Jackson said, “Wow! That’s a big increase in productivity. We are going to have plenty of bookmarks to sell. And, at $2 a bookmark, we are going to be rich!”

Let’s recap. Ellie and Jackson wanted to know what their productivity was.  Productivity is the amount of a good produced per worker per amount of time.

Let’s use this table to keep track of their productivity.

How did Jackson and Ellie produce in the first hour?

Each of them made complete bookmarks from start to finish.

What did they do to increase their productivity in the second hour?

The divided the labor between them. Each of them did some parts of producing the bookmark. Division of labor is one way to increase productivity.

What did they do to increase their productivity in the third hour?

They actually did two things.

First, they added new capital resources—the letter stamp and the stencils are capital resources. Capital resources are goods produced and used to produce other goods and services. Jackson and Ellie were already using a hole punch and scissors.  Adding the new capital resources helped them increase their productivity.

Other examples of capital resources are machines, tools, and equipment. When we use capital goods in production it usually increases workers’ productivity.

Second, they practiced using the new capital resources. Practice is a way to invest in your human capital—the skills, education, and talents you have. Investment in human capital usually increases productivity, too.

Now, you’ve learned a little bit about productivity. Maybe you can look at other things that people have produced over time and find the ways that they increased productivity. Remember to look for ways that they divided the work, used capital resources, and invested in their human capital.