3.6 Firms & Production Flashcards
1
Q
What factors influence the demand for the factors of production?
A
- Demand for a good/service (derived demand)
- Price of factors of production
- Availability of factors of production
2
Q
What are the pros of labour intensive production?
A
- Number of workers can be adjusted
- Meaningful worker/customer connections
- Workers can generate new ideas/offer suggestions
3
Q
What are the cons of labour intensive production?
A
- May be low productivity
- May be hard to recruit workers, and letting go of staff is unpopular
- Higher skilled the higher the wage bill
- Each worker needs wage and non-wage benefits
- Workers can get ill
4
Q
What are the pros of capital intensive production?
A
- 24/7 production
- No human error, complete consistency
- Shortage of skilled workers not a problem
- Technical economies of scale
5
Q
What are the cons of capital intensive production?
A
- Cost of purchasing/maintaining machinery high
- Most machinery cannot improve processes
- Negatively impacts morale of workers left behind
- Hard to adapt to demand changes
6
Q
What influences production?
A
- State of economy (recession/boom)
- Demand for goods/services
- Supply of factors of production
7
Q
What influences productivity?
A
- Process or product innovation
- Investment (interest rates)
- Training
- Competition
- Entrepreneurial freedom
