Reasons for production choices

Worker operating machinery on production line in factory
Many companies cannot afford the expense of capital intensive methods of production

Whether a company chooses to use labour intensive or capital intensive methods of production will involve many factors:

  • Finance available - a large amount of capital is required to invest in capital intensive production. Some businesses may not be able to afford to invest in this method of production
  • Quantity - if large quantities of identical goods are required then a company will be more likely to use capital intensive methods of production. Whereas if the product being supplied is a low quantity of a tailored product then labour intensive methods would be preferred
  • Technology - if the required technology to produce the goods is unavailable than the company would have no choice but to use labour intensive
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