Different Production Methods

Different Production Methods

The factor-proportions analysis becomes more complicated when the same product might be produced by different methods, such as with either high inputs of labor or high inputs of capital. Canada produces wheat in a capital intensive (high level of machinery per worker) way because of its abundance of low-cost capital relative to labor. In India, on the other hand, the same wheat is produced by using many fewer machines because-there is abundant and cheap labor. Where there is more than one way of producing the same output, it is the relative input cost in relation to output that determines which country can produce the same product more cheaply. The fact that products can be produced in different ways is another possible explanation of the Leontief paradox in that the U.S. industries facing the most competition because of cheap foreign labor are the ones that have responded most intensively by substituting machines for labor.

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