Chapter 21: Firms and production

Question 1

Productivity

Answer 1

• Output per worker
• Firms seek to achieve the highest possible productivity

Question 2

Factors influencing demand for capital goods

Answer 2

• Price
• Price of other factors (especially labour)
• Profit levels
• Corporation tax
• Income
• Interest rates
• Confidence levels
• Advances in technology

Question 3

Demand for land

Answer 3

Productivity
- Most fertile land will be highest demand
- City centres are productive as firms have potential to attract a large amount of customers

Question 4

Reasons for labour intensive production

Answer 4

• Large supply of labour making it cheap
• Some producers too small to take advantage of capital equipment
• Consumers may preger handmade products and pay a higher price
• Custom made products provide greater status
• Workers can be flexible in terms of what they do and te size of the labour force can be adjusted
• Labour can provide feedback on how to improve production methods and quality ofd products
• Price of capital may increase and labour can carry out the same functions with the same productivity

Question 5

Reasons for capital intensive production

Answer 5

• Advances in technology tend to make capital goods more affordable and productive
• Capacity to produce more products at a lower average cost (technical economies)
• Capital goods produce products of a uniform standard
• Do not engage in industrial action
• Do not have time ill
• Have to be maintined however

Question 6

Production and productivity

Answer 6

• If output per worker hour increases and the number of working hours stay the same, production will increase
• Producitivy could rise while production falls if unemployment increases