Contents
For application to data at discrete points of time, an approximation to the continuous Divisia index, known as translog index, may be used. This assumes that translog function describes the relationships between Y, K, L and T and also the relationships between the aggregates and components. Losses over time and as a process became sick and finally had to close down the unit.
In contrary, TI is superior to both KI and SI because TI numbers are symmetric in data of different time periods and also satisfy the factor reversal test approximately4 . It is based on Translog Production Function characterised by constant returns to scale. It allows for variable elasticity of substitution and does not require the assumption of Hicks-neutrality. Capital intensive is a business process or an industry that requires large amounts of money and other financial resources to produce a good or service. A business is considered capital intensive based on the ratio of the capital required to the amount of labor that is required. Here OK amount of capital and OL amount of labour produces the output level denoted by isoquant IQ.
Later on, the concept came to the fore after the works of Tinbergen , Schmookler , Kendrick , Fabricant , Abramovitz and Solow . How does ‘Inflation’ https://1investing.in/ affect the working capital requirements of a company? According to Gerstenberg, Capital structure refers to “the makeup of a firm’s capitalisation”.
The study tries to examine the factor productivity growth, especially of capital and labour across industry groups in West Bengal. The most important aspect of the paper will be estimates of total factor productivity growth for West Bengal, supposed to be the first comprehensive attempt in this area. Cent in 1999 from 16.2 per cent in 1960 while that of chemical products went down to merely 0.7 per cent from 16.4 per cent over the same period of time .
Distinguish between labour-intensive and capital-intensive technology of production.
Inflation is a situation of sustained increase in the general price level of goods and services. In such a situation, the working capital required to maintain a normal level of production and sale also increases. Inflation leads to increase in the cost of raw material, rise in wage rate, and rise in all other expenses and thus lead to a need for more working capital. The working capital requirement of a business thus, become higher with higher rate of inflation. Capital intensive method of production refers to a business process or industry in which the proprtion of capital required is more in comparison to labour. The use of capital intensive technology increases per capita profit or income of production unit.
TFP may be defined as the ratio of output to a weighted combination of inputs. ‘;Productivity growth is generally understood to represent the exogenous shift of a frontier production function. Therefore, a precise decomposition of growth of output into the contribution of change in inputs and that of total productivity is based on the economic theory of production function. Thus, a weighted average of growth rates of individual components gives the growth rate for the aggregate. These are respectively called the Divisia quantity Indexes of output, capital and labour.
Detailed plans of action prepared under financial planning reduce waste, duplication of efforts, and gaps in planning. It helps in forecasting what may happen in future under different business situations. By doing so, it helps the firms to face the eventual situation in a better way. By preparing a blueprint of these three situations the management may decide what must be done different situations.
The study shows that West Bengal has gradually lost its stronghold position once enjoyed during the early 1960s. The State’s shares in net value added, employment and number of factories have gone down drastically over the years. So far as employment is concerned, majority of the industry groups has witnessed negative growth rate. It is interesting to note that only 5 industry groups, which are highly capital intensive, contributed over 85 per cent of total profit in the manufacturing sector. It has also been found that growth of labour productivity in the manufacturing sector as a whole increased from 1.6 per cent in 1970s to 2.6 per cent in the 1980s and further to 5.7 per cent in 1990s.
Labour intensive techniques are used for the production of goods and services in which economy?
Explain any four points that highlight the importance of financial planning.
- However, as a whole, the industrial sector does not seem to have come out from decelerating condition.
- While machinery and equipment including electricity contributed 33.9 per cent during 1960, the joint contribution of these two industry groups to value added came down to only 3.8 per cent in 1999.
- The need for Divisia index has been noted by Solow and Jorgenson and Griliches .
- By preparing a blueprint of these three situations the management may decide what must be done different situations.
- The most important aspect of the paper will be estimates of total factor productivity growth for West Bengal, supposed to be the first comprehensive attempt in this area.
In a labor intensive method more of labor are employed to work and less of machine, whereas in a Capital intensive method more capital and less labor are employed. With the help of Capital intensive technology a country can develop its socio-economic overhead facilities rapidly. In net value added has gone down from 23.2 per cent over the decade of 1960s to 5.4 per cent during the decade of 1990s, while that of employment has gone down from 23.1 per cent to 8.4 per cent over the same period . State any four factors which affects the requirements of working capital of a company.
Merits of Capital intensive technique
‘;The wide usage of labour productivity is due to the fact that it can be used as proxy for the amount of goods available for consumption per labourer. In many industrialised countries labour productivity is calculated as the real value added per man-hour. However, most of the studies in India are based on data on number of employees or workers for estimation of labour productivity. Following this convention, we have also used the data on number of employees in calculating labour productivity.
The equation is based on the general neo-classical production function for which the elasticity of substitution need not be infinite, equal to unity or even constant. The above equation actually measures the difference between the rate of growth of real value added and the rate of growth of factor inputs. There are basically two methods of production namely labour intensive and capital intensive. Methods of production in which more work is carried on by technological machines rather than labours, then it is known as capital intensive technique.
It allows for variable elasticity of substitution and as pointed out above it does not require the assumption of Hicks-neutrality. Any growth in output that is not explained by some index of input growth is attributed to changes in technology or more broadly productivity. capital intensive technique refers to Thus, TFP growth is a catch-all measure that captures changes in efficiency in addition to pure technical change in the sense of shifts in the production function. The objective of the paper is to analyse the present condition of the industrial sector of the State.
It is the proportion of a company’s capital, financed through owners and borrowed funds. In other words, it represents the mix of long-term funds such as equity shares, preference shares, long-term loans, retained earnings etc., in the total capitalisation of a firm. A mixed economy is variously defined as an economic system blending elements of a market economy with elements of a planned economy, markets with state interventionism, or private enterprise with public enterprise.
Which of the following is not an economic goal of the firm
However, as a whole, the industrial sector does not seem to have come out from decelerating condition. Technological obsolescence of these six important industry groups may be one of the major reasons of industrial deceleration in the State. Furthermore, although some industries have lost their base, no new industry has come up to take over that position. In contrast, as the analysis in this paper suggests, the situation is entirely different in the arena of industrial development of the State.
Further, the share of food products fell to 2.8 per cent in 1999 from 13.5 per cent in 1960. While machinery and equipment including electricity contributed 33.9 per cent during 1960, the joint contribution of these two industry groups to value added came down to only 3.8 per cent in 1999. Rubber, plastic and petroleum products showed an even more dismal picture as their contribution came down from 43.2 per cent in 1960 to a mere 1.7 per cent in 1999. On the other hand, the contribution to all-India net value added increased for some industries such as food products; rubber, plastic, petroleum; and basic metal and alloys. Section I discusses the theoretical background and the methodology of the study.
Thus it is clear that higher the level of output is produced by using more capital and less labour. Capital intensive technique is a technique in which comparatively larger amount of capital is used against smaller amount of labour. The slowest decline is observed in manufacture of beverages, tobacco and tobacco products , manufacture of textile products and manufacture of rubber, plastic, petroleum and coal products . It implies the production is taken into a ratio where percentage of capital used is much high than the use of labour. That is, the business or production is mostly or fully dependent on capital. The use of Capital intensive technology increases the initial cost of production because it requires huge investment on imports.
Factor intensity can be discussed with the help of fixed capital per employee and value added per employee. However, there is no unique measurement of capital intensity or labour intensity. Industries can be grouped into labour-intensive or capital-intensive on the basis of average capital-labour ratio (K/L). If the capital-labour ratio of a particular industry is above the average then the industry may be considered as a capital-intensive one. However, this methodology is admittedly arbitrary in nature since there is no specific capital-labour ratio for the industries. The key feature of the GAA is separation of change in production on account of changes in the quantities of factors of production from residual influences, which include technological progress, learning by doing, etc.
The use of Capital intensive techniques will create larger employment opportunity in the long run. Capital intensive technique raises skill and efficiency of other factors of production. The need for Divisia index has been noted by Solow and Jorgenson and Griliches .