What is factor intensity?
2 Answers | Add Yours
I assume that you are asking about the use of this term in economics, so I have moved your question to that group and I will answer in those terms.
In economics, the term "factor intensity" refers to the relative proportion of the various factors of production used to make a given product. In other words, factor intensity looks at how much an industry uses capital, for instance, as opposed to labor. You can compare the factor intensity of various kinds of industries with one another.
As an example, we would say that agriculture is land-intensive relative to manufacturing. Another way to say this is that it has a higher factor intensity for land than it does for things like labor and capital. That means that each unit of agricultural product requires more land than each unit of manufacturing product. By contrast, a highly mechanized industry in a developed country will have a higher factor intensity for capital than a less mechanized industry in a less developed country.
"Factor intensity" is a measure used in economics, specifically in macro-economics (whole nation economics rather than micro- consumer finance economics), by which factors of production (e.g., labor, capital, land, natural resources, energy, ecological impact) are compared across various industries (e.g., compared across agriculture and auto-making) to highlight the intensity with which an industry utilizes a given factor.
This type of factor utilization comparison sheds light on how much industry overlap there is on one factor or one set of factors. Since there is a potential for a nation's industries to have overlapping intensity of demand for a factor or set of factors, there is a potential for resource depletion pertaining to that factor. For instance, during World War II, there were competing needs and demands for steel in both the auto-making industry and the military airplane industry: Auto making and airplane making industries both had a high factor intensity for steel resulting on a rapid draw-down of resources and leading to government intervention to redirect steel toward military airplane making.
Join to answer this question
Join a community of thousands of dedicated teachers and students.Join eNotes