Production, Costs and Revenue Flashcards
What is productivity?
Productivity measures the efficiency of the production process.
What is the formula for productivity?
Output per unit of input.
What is production?
Production is a measure of the value of the output of goods and services, e.g. measured by national GDP
What are the factors affect labour productivity?
Demand side factors:
When demand is high businesses make more intensive use of existing inputs e.g. machinery/overtime shifts
High demand creates increases profits which can then be used to fund investment in newer more efficient capital.
Supply side factors
Skills, experience and qualifications of the workforce
Speed and efficiency of infrastructure e.g. telecoms.
What is the short run?
At least one of the factor inputs is fixed.
What is the long run?
All factors of production are variable and the scale of production can change allowing a firm to benefit from economies of scale.
What is division of labour?
Specialisation of individual tasks in the production process.
What are the advantages of specialisation?
Increased productivity and quality Lowers the unit cost of supply Higher profits for businesses Lower prices gives consumers greater purchasing power Can lead to growth.
What are the disadvantages of specialisation?
Risks of repetitive strain injuries at work because of repeated tasks.
Reduced job satisfaction hurts productivity and also increased absenteeism.
Lower motivation and eventually causes lower productivity
Higher labour turnover
Employees may suffer structural unemployment.
What is average cost?
Total cost/Output
What is Average fixed cost?
Total fixed cost per unit of output
What is a fixed cost?
A cost that does not vary directly with the level of output.
What is a marginal cost?
The change in total costs form increasing output by one extra unit.
What are examples of fixed costs?
Renting costs
Fixed salary costs
Business insurance
What are examples of variable costs?
Wage costs Component parts Raw materials Energy and fuel costs Packaging costs
