4b Impact of Human Capital

EPF4 demonstrate knowledge that many factors affect income

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.

What is human capital?

Human Capital

When people improve their knowledge and skills through education and/or experience, it is called an investment in their human capital.

How do improvements in human capital affect productivity?

Human Capital & Productivity

Higher skilled workers increase productivity by producing more in the same period of time than lower skilled workers.

How do improvements in human capital affect cost of production?

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.