IGCSE Economics 0455: Quantity versus Quality of a Factor of Production

Kite & Co. is a small furniture workshop. It currently employs 6 carpenters, each equipped with a set of basic hand tools, and each carpenter produces 12 chairs per week. The workshop's current total output is therefore 72 chairs per week. The owner is considering two separate ways of increasing this output, and asks for your help comparing them.

Change A: The owner hires 2 additional carpenters, giving each of them the same basic hand tools already used by the existing staff. None of the 6 original carpenters receives any extra training or new equipment, and every carpenter, old and new, continues to work in exactly the same way as before, producing 12 chairs per week each.

Change B: Instead of hiring anyone new, the owner keeps the same 6 carpenters but sends all of them on a specialist joinery training course and replaces their basic hand tools with modern power tools. As a result, each of the 6 carpenters is now able to produce 20 chairs per week.

(a) Calculate the workshop's total weekly output after Change A, and state what happens to output per carpenter as a result of Change A. [3]

(b) Calculate the workshop's total weekly output after Change B, and state the new output per carpenter. [3]

(c) Using your answers to (a) and (b), explain the key economic difference between Change A and Change B, in terms of what each change does to output per carpenter. [2]

Part (a): Change A, an increase in the quantity of labour

Change A adds 2 more carpenters to the existing 6, making 8 carpenters in total. Since none of the carpenters, old or new, receives any extra training or better equipment, every carpenter continues to produce chairs at the original rate of 12 per week.

Total weekly output after Change A: $8 \times 12 = 96 \text{ chairs}$

This is an increase of: $96 - 72 = 24 \text{ chairs}$

on the workshop’s original output. However, output per carpenter stays at 12 chairs, exactly the same as before Change A. Total output has risen only because there are more carpenters producing at the same individual rate, not because any carpenter has become more productive.

Part (b): Change B. An improvement in the quality of labour and capital

Change B does not add any new carpenters. Instead, the existing 6 carpenters are trained and given power tools, so each of them can now produce 20 chairs per week instead of 12.

Total weekly output after Change B: $6 \times 20 = 120 \text{ chairs}$

Output per carpenter rises from 12 to 20 chairs. Unlike Change A, this increase in output is achieved with the same number of workers. It comes entirely from each carpenter becoming individually more productive.

Part (c): The key difference between Change A and Change B

Change A is an increase in the quantity of the labour factor: the workshop simply employs more carpenters, each producing at the same rate as the original staff. This raises total output (from 72 to 96 chairs) but does not change output per carpenter, which stays at 12, because nothing about how any individual carpenter works has improved.

Change B is an improvement in the quality of the labour and capital factors: the same 6 carpenters receive specialist training (improving the quality of labour) and are equipped with power tools instead of basic hand tools (improving the quality of capital). This raises output per carpenter from 12 to 20, because each existing worker is now individually more productive, not because there are more workers.

The general economic point is that only an improvement in the quality of a factor raises output per unit of that factor. Simply increasing the quantity of a factor can raise total output, as in Change A, but it leaves the productivity of each individual unit of the factor unchanged unless it is accompanied by better training, technology or equipment.

Final answers

(a) Total output after Change A = 96 chairs per week (an increase of 24); output per carpenter is unchanged at 12.
(b) Total output after Change B = 120 chairs per week; output per carpenter rises to 20.
(c) Change A (more carpenters) raises total output without changing output per carpenter; Change B (better-trained carpenters using power tools) raises output per carpenter itself, because it improves the quality, not just the quantity, of the factors used.