4.2 – Organizing Production Flashcards
What is production?
The transformation of raw materials (input) to finished or semi-finished goods and services (output).
What is Productivity?
Productivity measures the amount of output that can be produced from a given amount of input over a period of time
What is the formula for Productivity?
Productivity = Total output produced per period / Total input used per period
When does productivity increase?
More output or revenue is produced from the same amount of resources
The same output or revenue is produced using fewer resources
What is labour Productivity?
The measure of the amount of output that can be produced by each worker in a business.
What is Average Labour Productivity?
Average Labour productivity = Total output produced per period / Total no of employees
How to increase Productivity?
Implement division of labour. Division of labour is when tasks are divided among labourers. Each labourer specializes in a particular task, and thus this will increase productivity.
Train workers
Rewarding productive workers with bonuses and other performance-related pay
Increasing job satisfaction of workers
Replacing old machinery with new ones
Introduce new production processes which will reduce wastage, increase speed, improve quality and raise output.
What is Labour - Intensive Production?
More labourers are employed than capital.
What is Capital - Intensive Production?
More capital are employed than labourers.
What affects the demand of these factors of production?
The amount of goods and service the consumers demand: If more goods and services are demanded, more factors of production will be demanded by firms.
The market prices for labour and capital: If labour is more expensive than capital, firms will demand for capital and vice versa.
The productivity of labour and capital: If labour is more productive than capital, then labour is demanded and vice versa.
What is Total Revenue?
Total units sold * Price per unit
What is Average revenue per Unit?
Total Revenue / Total units sold
What is Total Costs?
Total Fixed Costs + Total Variable Costs
What are Fixed Costs?
Costs that are fixed in the short-term running of a business and have to be paid even when no production is taking place.
What are Variable Costs?
Costs that are variable in the short-term running of a business and are paid according to the output produced. The more the production, the more the variable costs.
