firms and production

Question 1

what are the 4 factors of production

Answer 1

land, labour, capital and enterprise

Question 2

describe land

Answer 2

natural resources used in the production process, such as raw
materials

Question 3

describe labour

Answer 3

the physical and mental human input into the production process.

Question 4

describe capital

Answer 4

the manufactured goods or machines used in the production process inorder to create a good or service

Question 5

describe enterprise

Answer 5

risk takers who provide the ideas and know-how to organise the
other three factors of production in the pursuit of profi t

Question 6

define derived demand

Answer 6

Derived demand means
that a factor of production
is not demanded for its own
sake, but for the goods and
services that it is used to
produce

Question 7

define labour intensive

Answer 7

In labour-intensive
industries, the cost of
labour is proportionately
higher than the cost of
other factors of production

Question 8

define capital intensive

Answer 8

In capital-intensive
industries, the use and
cost of capital is more
prominent than that of any
other factor of production

Question 8

Whether firms choose more capital- or labour-intensive production methods
depends on several related factors:

Answer 8

• The cost of labour compared to the cost of capital
• the size of the market
• the firms objectives

Question 9

why might the capital intensive production be preferred

Answer 9

• Capital-intensive production enables firms to use mass production techniques,
  such as automation in car manufacturing.
• Unit costs of production are therefore relatively low
• The use of capital-intensive technologies reduces human error in the
  production process

Question 10

why might the labour intensive production be favoured

Answer 10

• It is suitable for producing products that are highly customised
• labour-intensive output enables customers to receive a personalised service
• As workers are highly skilled and experienced, the quality of the product will
  also be high.

Question 11

define production

Answer 11

Production refers to the
total output of goods and
services in the production
process

Question 12

define productivity

Answer 12

Productivity is a measure
of efficiency found by
calculating the amount
of output per unit of a
factor input

Question 13

why is high productivity important

Answer 13

• economies of scale
• higher profits
• higher wages
• economic growth

Question 14

define innovation

Answer 14

Innovation is the
commercialisation of new
ideas and products. It is a
vital source of productivity

Question 14

what are the 5 main factors that influence the rate of productivity growth

Answer 14

• investment
• innovation
• skills and experience
• entrepreneurial spirit
• competition