Production Flashcards
What is the role of producers?
Makes good and services by combining the factors of production. They
vary in size from very small to an MNC. They are responsible for the
supply element of demand and supply. They therefore influence market
prices. Often, their main aim in to make a profit
Why are producers important in the economic system?
They are important in an economic system because they both employ workers and pay their wages. Employments results in goods and services
being produced. Paying workers enables them to buy the goods and
services that a range of different producers provide
How can individuals be producers
ndividuals as producers:
Individuals can be producers of non-market goods and services such as cleaning, child-minding and cooking. Many will work part-time. Other
individuals are self-employed e.g. plumbers and electricians and thus, keep all of any profits made after tax
Howcan governments be producers ?
The private sector is owned and run by the government in the UK e.g. The
Army, Libraries, NHS. The government provide these services because some
individuals would not be willing to pay for services they may not directly
consume (or believe they may not need imminently). Previously, the UK
also produced steel and coal, before being privatised
How can firms act as producers?
Can vary from sole traders to MNC’s. some produce for their local area e.g.
Gloucestershire, the UK or abroad. Larger producers are often able to exert
power over markets by limiting the amount the supply or by lowering prices
to drive and drive out competitor
What is production?
The total output of goods and services produced by a firm or industry in a certain amount of time
By bringing together factors of production
WHAT IS increase in production likely to bring about:
• An increase in employment, unless greater productivity causes it
• An increase in profits for firms and the industry
• Larger economies of scale
• An increase in market share if the production of one firm increases as
against that of other firms
• Economic growth for the economy
• A rise in the standard of living, as consumers have more goods and
services to buy
What is a possible negative effect of production?
An increase in productivity can also cause
diseconomies of scale (the disadvantages
of growing), where unit costs rise as
output increases instead of falling! If this
is likely to happen, firms will be unwilling
to increase production
What is productivity ?
One measure of the degree of efficiency in USE OF FACTORS OF PRODUCTION in the production process
How to calculate productivity ?
Total output
__________
Total input
What does productivity depend on?
If the inputs of the production process can be improved e.g. by
investing in better equipment, software, raw materials and ensuring people have access to better training and education to improve the range of skills and knowledge available, which in turn will help improve productivity
• Small changes can make a huge difference, rather than investing
in expensive schemes e.g. Kaizen Circles
Why is high productivity important?
•Individuals are likely to be rewarded with higher wages and an
increase in the standard of living
• Firms likely to see lower average costs, increasing economies of
scale. This can make the firm more competitive so that it can
decrease prices and/or compete more effectively. This will benefit the economy by increasing GDP through greater
consumption and more exports. This then improves the BOP
• Greater profits for firms, allowing them to pay higher wages to
attract the best workers and reinvest in new equipment and
research. Investment should increase competitiveness and GDP.
Higher wages will benefit the economy by encouraging people to
get better qualification and to improve their skills, thus further
increasing productivity
• Governments will benefit as total output will rise throughout the
economy. This is likely to lead to greater employment and higher
wages, which leads to greater government revenue through
taxes. Additionally, more competitive firms will lead to greater exports and thus, further economic growt
What are the costs of productivity?
• If a firms grows using capital equipment rather than human labour,
this may increase unemployment-» government will
have to support unemployed citizens and their families through
benefits,»_space;> increasing their costs, which means they may not be
able to invest in other areas e.g. health (opportunity cost)
• Could lead to greater international competitiveness, which may lead
to other countries retaliating, thus causing a fall in GDP
How can producers increase productivity?
- Workers specialising in part of the production process
- Investment in new technology and more capital equipment
- Improving the skills of workers through trainin
When demand in the economy is high….
firms need to increase
production to meet demand»> firms to produce as much as
they can (called full capacity)»»>productivity of
workers rising, as all factors of production are being used to their full
extent. The opposite happened when demand falls
