Production And Productivity Flashcards
What is production a measure of
The value of the output of goods and services e.g. measured by national GDP
What is productivity a measure of
The efficiency of factors of production - measured e.g. output per worker employed
What is productivity in the LR
A major determinant of economic growth and inflation
What does a fall in labour productivity result in
A rise in firm’s unit costs of productivity
What does higher productivity of labour result in
Businesses to pay higher wages and achieve increased profits at the same time
Examples of factors affecting labour productivity
- competition
- advances in production technology
- qualities of business management
- level of demand for a product
What is specialisation
Where we concentrate on one product or task
When can specialisation occur
At all levels of economic activity
When does the division of labour occur
Where production is broken down into many separate tasks
Benefits of the division of labour
It can raise output per person as people become proficient through constant repetition of a task
Key advantages from specialisation
- higher labour productivity and business profits
- surplus account that can then be traded internationally
- lower prices, higher real incomes and GDP growth
How does specialisation create higher labour productivity and business profits
Learning by doing increases output per hour worked = lower unit cost off supply = profits
How does specialisation create surplus output
Comparative advantage
How does specialisation create lower prices, higher real incomes and GDP growth
Lower prices gives consumers greater real purchasing power
Disadvantages of specialisation and division of labour
- unrewarding work
- less devoted to their work ^
- some workers have little training and may not be able to find other jobs
- mass produced standardised goods lack variety for consumers
