Discuss the use of capital-intensive production. - Scottish Highers Business Management - Question 2 (a) - 2019

Capital-intensive production refers to production processes that primarily rely on large amounts of capital machinery and equipment rather than labor.

Advantages of Capital-Intensive Production

1. Increased Efficiency: Automation through advanced machinery can lead to higher production rates and consistency in output quality.
2. Lower Operating Costs: Over time, the use of capital can result in lower unit costs as machinery can produce large quantities at reduced operational costs.
3. Higher Output: Capital-intensive methods can produce goods in larger quantities compared to labor-intensive methods.

Disadvantages of Capital-Intensive Production

1. High Initial Investment: The upfront costs of machinery and technology can be substantial, making it a significant risk for businesses.
2. Reduced Employment: As operations become more automated, the reliance on human labor decreases, potentially leading to unemployment in certain sectors.
3. Maintenance and Downtime: Equipment may require regular maintenance, and any failure can lead to substantial production delays.

In summary, while capital-intensive production can provide substantial benefits in efficiency and output, it also poses challenges, particularly regarding initial investments and employment.