CHAPTER 13 The Cost of Capital Sources of capital Component costs WACC.
4b impact of human capital on production costs
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Transcript of 4b impact of human capital on production costs
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4b Impact of Human Capital
EPF4 demonstrate knowledge that many factors affect income
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Impact of Human Capital
Businesses seek to lower production costs in order to increase profits.
As workers invest in their own human capital and become more skilled, they become more productive (i.e., can produce more in the same amount of time) which can lower the cost of production.
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What is human capital?
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Human Capital
When people improve their knowledge and skills through education and/or experience, it is called an investment in their human capital.
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How do improvements in human capital affect productivity?
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Human Capital & Productivity
Higher skilled workers increase productivity by producing more in the same period of time than lower skilled workers.
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How do improvements in human capital affect cost of production?
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Human Capital & Cost of Production
Increases in productivity tend to lower cost of production.
If four workers can accomplish the same amount of work in a day as five workers, this is an increase in productivity which saves the business the wages of one worker.