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A-LEVEL ECONOMICS > 4.1.4 > Flashcards

4.1.4 Flashcards

1
Q

define production

A

total output produced by ab individual/firm

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2
Q

what’s production function?

A

shows relationship between quantity of inputs and outputs

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3
Q

define productivity

A

measure of the rate of production by 1 or more factors of production

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4
Q

define long run (law of diminishing returns)

A

all factors of production are freely available to get hold of

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5
Q

define short run (law of diminishing returns)

A

at least 1 factor of production you can’t get more of

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6
Q

define marginal returns (of labour)

A

amount of input per 1 extra unit of labour

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7
Q

define average returns (of labour)

A

output per unit of inputs

output / no. inputs

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8
Q

define total returns (of labour)

A

total output produced by a no of units over a period of time

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9
Q

state the law of diminishing returns

A

as you add successive units of a variable factor to a fixed factor of production
output increases by progressively smaller amounts
CHECK GRAPH IN NOTES

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10
Q

define specialisation

A

concentrating on what you do best

individual/regional/national levels

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11
Q

examples of specialisation

A

producing more than you need

selling excess product and buying other goods you need

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12
Q

define division of labour

A

breaking down a production process into a series of smaller tasks with individual workers performing 1 particular task
(type of specialisation)

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13
Q

adv. of specialisation

A
  • factors of prod. used more productively
  • over time labour becomes experienced + workers
    develop skills that increase productivity
  • firms can invest in capital good relevant to their
    industry which increases labour productivity
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14
Q

define capital goods

A

goods used to produce other goods rather than being bought by consumers

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15
Q

disadv. of specialisation

A
  • change in consumer demand can leave firms/economy
    with unwanted output -> unprofitable labour + capital
  • structural employment -> workers only have skills in
    their field + no training in others so cant find a new job
    elsewhere
  • countries specialising in high profit industries have strong currencies -> economy becomes vunerable
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16
Q

define returns to scale

A

ratio concerning quantity of inputs + outputs

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17
Q

give an example of increasing returns to scale

A

input increases by 10%

output increases by 15%

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18
Q

define fixed cost

A

don’t change as the level of output changes

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19
Q

define variable costs

A

change as level of output changes

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20
Q

define semi-variable costs

A

costs with a fixed component

and a variable component that fluctuates

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21
Q

examples of semi-variable costs

A

gas/utility bill

telephone bill

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22
Q

total costs equation?

A

total costs = variable costs + fixed costs
CHECK GRAPH IN NOTES
!

23
Q

how to work out marginal cost

A

difference between the variable cost values

24
Q

average fixed costs equation?

A

AFC = fixed costs / output

25
Q

average total costs equation?

A

ATC = total costs / output

26
Q

explain internal economies of scale

A

larger firms can benefit from lower average costs

this improves their ability to compete in their market place

27
Q

explain external economies of scale

A

larger firms benefit from lower costs
but benefits available to competitors in the same industry
(unit cost per output reduced -> firms share cost)

28
Q

explain technical economies of scale

INTERNAL

A

resources/equipment
larger firms benefit from:
-expensive capital equip. -> reduces av. costs + high quality products so higher demand
-specialisation of labour -> better productivity
-research + development -> more likely to introduce new processes to improve products

29
Q

explain financial economies of scale

INTERNAL

A

cheaper for larger firms to access finance as they have lower risk than small firms
find it easier to get loans/overdraft

30
Q

explain purchasing economies of scale

INTERNAL

A

greater output = materials can be bought in bulk at low cost
large firms can use size to bargain with suppliers
suppliers rely on them to buy their products

31
Q

explain marketing economies of scale

INTERNAL

A

costs like advertising can be spread over more units of output if a firm produces on a large scale
so ad campaigns = more effective for larger firms

32
Q

explain risk baring economies of scale

INTERNAL

A

large firms often diversify into diff products + markets
can ensure they have the right choice of suppliers
helps protect firms from sudden change e.g. fall in demand or liquidation of a supplier

33
Q

explain managerial economies of scale

INTERNAL

A

large firms can employ specialist managers -> benefit from division of labour
large firms have high salaries to attr. best managers

34
Q

explain specialist firms + infrastructure

EXTERNAL

A

firms tend to locate where an industry is located

35
Q

explain training + education

EXTERNAL

A

local college/uni offer courses suited to local community

helps all firms involved

36
Q

explain reputation

EXTERNAL

A

city/area gains excellent reputation for the provision of a certain good/service

37
Q

why do dis-economies of scale occur?

A

firm/industry gets larger so more problems appear

leads to higher average costs of production

38
Q

EXAMPLES OF DIS-ECONOMIES OF SCALE

A

CHECK NOTES

39
Q

define economies of scale

A

factors that cause average costs to fall
as output rises
CHECK NOTES FOR GRAPH

40
Q

total revenue equation?

A

price x quantity

41
Q

average revenue equation?

A

(price x quantity) / quantity

42
Q

marginal revenue equation?

A

change in total revenue / change in quality

43
Q

define marginal revenue

A

increase in total revenue from selling 1 more unit of the product

44
Q

average variable costs equation?

A

average total costs - average fixed costs

45
Q

define invention

A

designing a new product/process

46
Q

define innovation

A

developing the product until it’s saleable

47
Q

what can technology changes affect?

A

methods of production
productivity
efficiency
firm’s cost of production

48
Q

what can technology changes lead to?

A

new products
new markets
can destroy existing markets
can change market structure -> one firm can dominate (monopoly)

49
Q

profit equation?

A

profit = total revenue - total costs

50
Q

define normal profit

A

amount of profit needed to keep factors of production in their current employment

51
Q

define abnormal profit

A

extra profit on top of normal profit

52
Q

define super-normal profit

A

abnormal profit that only exists in the short run

53
Q

state 2 uses of proft

A

re-invested

given as dividends to share holders/owners

A-LEVEL ECONOMICS (7 decks)

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