A-level Business Studies Lesson 23 (3.4.2 & 3)

Question 1

Efficiency

Answer 1

Output (production) is maximised from a given level of inputs.

Question 2

Economies of scale

Answer 2

The advantages that an organisation gains due to an increase in size. These cause an increase in efficiency (a decrease in
the unit cost of production) and also tend to improve labour productivity.

Question 3

Diseconomies of scale

Answer 3

The disadvantages that an organisation experiences due to an increase in size. These cause a decrease in efficiency and or an increase in unit cost of production.

Question 4

Capital-intensive production

Answer 4

Methods of production that use a high level of capital equipment in comparison to other inputs, such as labour. A
fully automated factory and a nuclear power station are examples of capital intensive production.

Question 5

Labour-intensive production

Answer 5

Methods of production that use high levels of labour in comparison to capital equipment. Many service industries, such as retailing, restaurants and call centres, use a large number of people in comparison to equipment.

Question 6

Capacity

Answer 6

The maximum total output or production that a business can produce in a given time.