methods of production 2

Question 1

define productivity

Answer 1

output per input
- this could be a person or machine, per hour

Question 2

define production

Answer 2

total amount produced in a given time

Question 3

define efficiency

Answer 3

• maximising output whilst minimising costs and waste
• helps businesses to be more productive and therefore competitive
• produce where average costs are at their lowest

Question 4

what is a business able to do when they have high productivity?

Answer 4

• enables lower prices = increased sales and revenue
• competitive advantage = increase market share
• if prices are kept the same then profits increase
• increased productivity could be at the expense of quality

Question 5

benefits of improved efficiency

Answer 5

• labor productivity increases
• unit costs fall
• profit margins increase
• improved flexibility
• ability to charge lower prices = improve competitiveness

Question 6

how does a business improve efficiency by reducing costs?

Answer 6

1. staff redundancies (customer service suffers)
2. reduce wage cost (switch production to a low-wage country)
3. product redesign (easier/cheaper to produce)
4. reducing waste (does the cost of waste reduction outweigh benefits)