A company that makes shopping carts for supermarkets and otherstores recently purchased some new equipment that reduces thelabour content of the jobs needed to pro- duce the shopping carts.Prior to buying the new equip- ment, the company used four workers,who produced an average of 80 carts per hour. Labour cost was $10per hour and machine cost was $40 per hour. With the new equipment,it was possible to transfer one of the workers to anotherdepartment. Machine cost increased by $10 per hour while outputincreased by four carts per hour.
a. Calculate labour productivity before and after the newequipment. Use carts per worker per hour as the meas- ure of labourproductivity.
b. Calculate the multi-factor productivity before and after thenew equipment. Use carts per dollar cost (labour plus machine) asthe measure.
c. Comment on the changes in productivity according to the twomeasures. Which one do you believe is more pertinent for thissituation?
