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What is meant by the term capital intensive production?

What is meant by the term capital intensive production?

Capital intensive refers to a productive process that requires a high percentage of investment in fixed assets (machines, capital, plant) to produce. A capital-intensive production process will have a relatively low ratio of labour inputs and will have higher labour productivity (output per worker).

What is capital intensive production and examples?

Examples of capital-intensive industries include automobile manufacturing, oil production, and refining, steel production, telecommunications, and transportation sectors (e.g., railways and airlines). All these industries require massive amounts of capital expenditures.

Is capital intensive good or bad?

Capital intensive organizations are those organizations which invest more in capital assets. Normally 70 to 80 percent of total assets consist of fixed assets, plant and machinery. The long term growth is good in capital intensive industries. The risk involved is also higher hence the competition is considerably low.

What does labour intensive production mean?

Labour intensive is when products are mainly produced by human workers. Machines and special tools may be used too, but overall it requires human creativity and effort to produce the product. A busy kitchen is one example of labour intensive production.

What are 2 disadvantages of capital intensive production?

Disadvantages of capital intensive production

  • Initial high costs of investment and possible training costs.
  • Lack of flexibility in responding to a fall in demand.
  • Machinery lacks initiative, e.g: it is unlikely to be innovative, provide ideas on how to improve production or take on extra responsibilities.

Which country is capital intensive?

Thus the United States, abundant in capital relative to France, exports steel, the capital-intensive good. France, abundant in labor relative to the United States, exports clothing, the labor-intensive good. This is the H-O theorem. Each country exports the good intensive in the country’s abundant factor.

What are the advantages of capital intensive?

Capital intensive

Advantages Disadvantages
Less employee wages and costs More difficult to customise orders
Quality can be standardised, the same every time Breakdowns in production can be costly
Machines can work continuously, 24/7 Initial set up costs of machinery are high

Is bank capital intensive?

Some businesses like IT, software design, banking, consulting etc. do not require much capital and money or resources to deliver output, hence are not capital intensive industries. The higher the ratio between capital expense and labor expense, the more capital intensive is the industry.

Which is the most Labour intensive crop?

In the U.S., two of the most labor-intensive food crops are mushrooms and strawberries, according to Philip Martin, a professor in the department of agriculture and resource economics at the University of California, Davis. Cotton and cottonseed harvesting were mechanized long ago.

What makes a capital intensive production process capital intensive?

Capital intensive production requires a higher level of investment and larger amount of funds and financial resources. A capital intensive production process is mostly automated and able to generate a large output of goods and services.

Why are capital intensive industries more vulnerable to economic slowdown?

Their high operating leverage makes capital-intensive industries much more vulnerable to economic slowdowns compared with labor-intensive businesses because they still have to pay fixed costs, such as overhead on the plants that house the equipment and depreciation on the equipment.

Which is an example of a labor intensive industry?

Labor intensive refers to the production that requires a higher labor input to carry out production activities in comparison to the amount of capital required. Examples of labor intensive industries include agriculture, restaurants, hotel industry,…

How does investment in capital affect labour productivity?

This contrasts with very early methods of car production which were much more labour intensive, with groups of workers manually combining different components. Labour productivity. Increased investment in capital can help to increase labour productivity (output per worker).