Micro 4 Flashcards
What is the short run
When at least one factor of production is fixed
What is the long run
When there are no fixed factors of production
What is the production process
The conversion of factors of production into outputs
What is productivity
A measure of how efficiently the factors of production are used to produce outputs
What are the three types of productivity
Labour productivity
Capital Productivity
Land productivity
What is productive efficiency
When the minimum inputs are used to produce the maximum output at the lowest cost
How does productive efficiency relate to unit cost
At the point of productive efficiency, no additional output can be produced from the factor inputs available to produce a lower unit cost
What is allocative efficiency
When there is an optimal distribution of goods and services, taking into account consumer preferences
What is pareto efficiency
Occurs when no-one can be made better off without someone being made worse off
What is specialisation
Occurs when each worker completes a specific task in the production process
What is the division of labour
When production is broken down into many separate tasks
How does division of labour relate to unit cost
The division of labour improves raises productivity as each worker becomes proficient in their task, which maximises output at lower cost - decreasing unit cost
What are the benefts of division of labour
- Higher output
- Greater opportunities for economies of scale
- Helps lower operating costs, lowering selling price
What are the limitations of the division of labour
- Work becomes repetitive, lowering motivation and retention
- Decrease in variety of goods and services
What is the law of diminishing returns
Employing an additional factor of production will lead to a smaller decrease in output
What are the four types of demand
Joint
Competitive
Composite
Derived
What is joint demand
When two goods are complementary and are needed together
What is competitive demand
When a number of substitutes exist
What is derived demand
When the demand for a good depends for another good or service
What is composite demand
When goods have multiple uses
What are the types of supply
Joint
What is joint supply
When two goods are supplied together from the same source
What is supply
The amount of goods and services producers are willing and able to sell at a given price at a given time
What is a supply curve
Shows the relationship between quantity and price
How is a change in price shown on the supply curve
Shown as a movement along the supply curve - either a extension or contraction
What are the non-price determinants of supply
- Technology
- Production costs
- Government policy
- Price of related goods
- Future expectation of price
