![]() ![]() New trade theory suggests production will concentrate in certain areas. Increased capital intensity means that the workers who manage the machines need sufficient skills and training to operate/design them. Increased capital intensity usually requires sufficiently skilled labour. Investment requires sufficient savings or the ability of firms to borrow to finance the investment. To promote capital-intensive industry requires significant investment in fixed assets. More capital intensive methods enable increased output and higher living standards. This capital intensity and labour productivity play an important role in determining long-run economic growth. Increased investment in capital can help to increase labour productivity (output per worker). This contrasts with very early methods of car production which were much more labour intensive, with groups of workers manually combining different components. A large part of the production is automated with robots, assembly lines and machines to produce the car. New technology such as Artificial Intelligence, micro-computers and the internet have enabled previously labour-intensive industries (taxi’s, delivery to become more capital intensive – e.g. In recent years, technological development have enabled increased capital intensity in many industries. As a result, the productive process will have economies of scale (increased output leads to lower average costs) Capital intensive refers to a productive process that requires a high percentage of investment in fixed assets (machines, capital, plant) to produce.Ī capital-intensive production process will have a relatively low ratio of labour inputs and will have higher labour productivity (output per worker).Ī capital intensive production process will tend to have a high ratio of fixed costs to variable costs. ![]()
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