Production Flashcards
(79 cards)
1
Q
What is production?
A
Process of converting resources into goods and services
2
Q
What are the 4 factors of production?
A
- Land
- Labour
- Capital
- Enterprise
3
Q
What is land?
A
Earth’s natural resources (in and on it)
4
Q
What is labour?
A
Human workforce
5
Q
What is capital?
A
Equipment used in producing goods & services
6
Q
Name 2 types of capital
A
- Working Capital
2. Fixed Capital
7
Q
Give an example of working capital
A
Stocks of raw materials and finished goods
8
Q
Give an example of fixed capital
A
Factories, shops, machines, tools and equipment
9
Q
What is human capital?
A
Value of an individual worker to a business
10
Q
How can you increase human capital?
A
Through training and education
11
Q
What is enterprise?
A
Entrepreneurs = Willingness to take a risk to make a profit
12
Q
What is capital intensive production?
A
Involves using relatively more capital than labour
13
Q
What is labour intensive production?
A
Involves using relatively using relatively more labour than capital
14
Q
What is productivity?
A
It’s the output per unit of input
15
Q
How can production be increased?
A
By raising productivity: involves using factors more effectively
16
Q
Why do firms try to increase productivity?
A
To lower costs and increase profits
17
Q
How can firms increase productivity?
A
e.g. by introducing new working practices or investing in new machinery
18
Q
What does the primary sector do?
A
Turns natural resources into raw materials for manufacturing (secondary) sector
19
Q
Give 4 areas of work in the primary sector
A
- Mining & Quarrying
- Agriculture
- Fishing
- Forestry
20
Q
What does the primary sector provide for the secondary sector?
A
Raw materials
21
Q
What does the secondary sector do?
A
Turns raw materials into finished products
22
Q
What is de-industrialisation?
A
Growth in tertiary sector at the expense of manufacturing
23
Q
Name 4 reasons for de-industrialisation
A
- Competition from overseas
- Changes in consumer demand
- Advances in technology
- Growth in public employment
24
Q
What does the tertiary sector do?
A
Provides support services for the extractive (primary) and manufacturing (secondary) sectors and to consumers
25
In developing countries, what is happening to primary, secondary and tertiary sectors?
1. Declining primary sector production
2. Increasing manufacturing
3. Some growth in the tertiary sector
26
In developed countries, what is happening to primary, secondary and tertiary sectors?
1. Sharply decreasing primary sector production
2. Decreasing manufacturing
3. Rapidly growing tertiary sector
27
Why do businesses need to define potential costs?
To make informed business decisions → to make profit
28
What are fixed costs?
Same at all levels of output in the short run
29
What are variable costs?
Costs of production that increase directly as output increases
30
Give two examples of a fixed cost
Insurance, Rent, Salaries, Taxes, Loans
31
Give two examples of a variable cost
Piece rate labour, Commissions, Direct materials, Electricity, Telephone
32
Draw a fixed cost curve
See mind map
33
Draw a variable cost curve
See mind map
34
What are changing costs?
Costs that change over a period of time as a business grows and develops
35
Explain how a fixed cost in the long run may change?
Factors may vary e.g. capacity may be increased
36
Direct cost are usually...
Variable e.g. Materials
37
Indirect cost are usually...
Fixed e.g. Rent
38
What are indirect costs as known as?
Overheads
39
What is an accounting cost?
The value of an economic resource used up in production
40
How do you work out profit?
Total Revenue (TR) - Total Costs (TC)
41
How do you work out total revenue?
Price x Quantity
42
What is total revenue?
Total income earned by the business
43
What are total costs?
All the costs of production over a period of time
44
How do you work out total costs?
TC = VC + FC
45
What is an average cost?
Cost of producing a single unit
46
How do you work out an average cost?
Total Cost
----------------
Output
47
What is economies of scale?
As production output increases, average costs decrease
48
What is internal economies of scale?
Cost benefits enjoyed by a single firm when it expands
49
Name the 6 internal economies of scale
1. Marketing Economies
2. Technical Economies
3. Managerial Economies
4. Financial Economies
5. Purchasing Economies
6. Risk-bearing Economies
50
Explain how marketing economies of scale works
1. Advertising = fixed cost → spread over more units for larger firms = cost per unit is lower
2. Larger firms benefit from brand awareness - products are trusted by consumers → doesn't need to advertise as much to get sales
51
Explain how technical economies of scale works
Occurs when a business invests in new technology and is able to increase production → production costs per unit will fall
52
Explain how managerial economies of scale works
Larger firms can employ specialist managers to take of different areas of business → they gain expertise and
experience in specific area of business → better decision-making abilities in that area
53
Explain how financial economies of scale works
Occurs when a large business can borrow money at a lower rate of interest than a smaller business
54
Explain how purchasing economies of scale works
Larger firms making lots of goods will need larger quantities of raw materials = buy in bulk → negotiate discounts with suppliers
55
Explain how risk-bearing economies of scale works
Occurs when a business produces a range of products → not dependant on just one product
56
When do external economies of scale occur?
Occurs when a whole industry grows
57
Draw curve an average cost curve to represent economies/diseconomies of scale
See mind map
58
Name the 4 examples of external economies of scale
1. Skilled Labour
2. Infrastructure
3. Commercial Services
4. Cooperation
59
Explain how skilled labour is an example of external economies of scale
There may be build up of labour which has skills and work experience needed by that industry = helps cuts training costs
60
Explain how infrastructure is an example of external economies of scale
Better transport network suited/servicing a industry = decrease in costs for a company working within that industry
61
Explain how commercial services is an example of external economies of scale
Specialist suppliers will be attracted to the area = external cost saving
62
Explain how cooperation is an example of external economies of scale
When firms in same industry are located close to each other, they may cooperate more e.g. by sharing an R & D centre
63
What is diseconomies of scale?
When average costs begin to rise as (a firm gets too big) inefficiencies occur
64
Name 3 reasons for diseconomies of scale
1. Control and Coordination
2. Labour Relations
3. Bureaucracy
65
Explain how bureaucracy can lead to diseconomies of scale
Large firms may become more bureaucratic = decision-making and communication may become slower
66
Explain how a lack of control and coordination can lead to diseconomies of scale
Large firms with thousands of employees and dozens of factories all over the world may be difficult to keep under control and coordinate
67
Explain how poor labour relations can lead to diseconomies of scale
Relations between workers and managers may worsen e.g. the needs of individual workers may be neglected &
their motivation may suffer
68
How can a nation's wealth be increased?
By improving its productivity
69
Name 3 areas of productivity that a nation can improve
1. Land
2. Labour
3. Capital
70
What are 4 ways the productivity of land can be improved?
1. Irrigation can divert water in rivers or lakes to unproductive land
2. Fertilisers and pesticides can raise crop yield
3. Flooded land (e.g. swampland) can be drained and then farmed
4. Disease-Resistant and higher-yielding GM crops can be
grown
71
How do you increase labour productivity?
By improving the quality of human capital
72
What are 3 ways the productivity of labour can be improved?
1. Education and Training
2. Improve Motivation of Workers
3. Improve Work Practices
73
How can we improve the motivation of workers?
Financial incentive schemes (e.g. price rates) or non-financial methods (e.g. job rotation and team working)
74
How can we improve work practices?
Changing factory layout to improve flow of production or
| making labour more flexible
75
How do you increase capital productivity?
By improving the sectors
76
How can you improve the primary sector?
In agriculture: machinery, irrigation, computerised lacking of livestock, fertilisers & pesticides have helped to increase output
77
How can you improve the secondary sector?
Flow production, robots, computer numerically controlled machines & computer integrated machinery are used to raise output
78
How can you improve the tertiary sector?
1. Online shopping has improved productivity in retailing and banking
2. Dramatic advances in medicine and surgical technology have raised productivity in healthcare
79
How do you work out labour productivity?
Total output
---------------------
No. of workers
