Answer to Question #292814 in Economics for Hafsa

Question

What is meant by labor-intensive commodity? Capital-intensive commodity? Capital–labor ratio? 

Answer 1

Labor intensive refers to a process or industry that requires a large amount of labor to produce its goods or services.

Capital intensive commodity refers to that commodity in which larger amount of capital is comparatively used. In such a commodity the amount of capital used per unit of output is larger than what it is in case of labour intensive commodity.

The capital-labour ratio (K/L) can measure the capital intensity of a firm. Typically, over time, firms tend to have a higher capital-labour ratio as they seek to gain productivity improvements from investment in capital and automating the production process.