Production

Question 1

What is production?

Answer 1

Production converts inputs, or the services of factors of production such as capital and labour, into final output.

Question 2

What are the outputs?

Answer 2

The outputs can be capital goods. But they will be used as inputs in the production to produce consumer goods.

Question 3

Difference between consumer and capital goods?

Answer 3

Consumer goods : Goods for consumption
Capital goods : Goods for further production

Question 4

What are producers?

Answer 4

Producers, as an economic agent, are firms or people that make goods or provide services. They make decisions on what to produce, for whom to produce and how to produce (in response to the market).

Question 5

What is the meaning of productivity?

Answer 5

It is the output per unit of factor employed. It is a way to measure the efficiency of a firm or an economy in producing its output.

Question 6

What does a greater productivity mean?

Answer 6

Means more goods could be produced with the same amount of inputs employed.

Question 7

Equation for labour productivity?

Answer 7

output per unit of labour employed = Total output / Total unit of labour

Question 8

What can labour productivity be used for?

Answer 8

It can be compared against another firm, another industry or another country.

Question 9

What factors affect labour productivity? Individual level.

Answer 9

Individual level : compensation (salary/wage), work environment, training, career development opportunities, wellness, diversity, increased responsibility, and management quality.

Question 10

What factors affect labour productivity? Firm level.

Answer 10

capital-labour ratio, training, supervision and monitoring, management, payment methods, environment, working ethics and culture.

Question 11

What is the productivity gap?

Answer 11

It is the difference between labour productivity in the UK and in other developed countries.

Question 12

What is specialisation?

Answer 12

Specialisation occurs when a country (or a region) /firm decides to focus on making a particular good/service with a relative advantage.

Question 13

What is division of labour?

Answer 13

The division of labour occurs when the production process of a good is broken down in to various small tasks.

Question 14

What is capital widening?

Answer 14

involves greater investment to make use of existing technology and increase the amount of capital available.

Question 15

What is capital deepening?

Answer 15

Attempts to increase output through better technology and higher output per worker, for example, a new technology which makes capital more productive.

Question 16

What are the advantages of specialisation?

Answer 16

• people can specialize in what they are best at
  -improved quality, high quantity (increased labour productivity, greater output → increased trade → economic growth)
• promotes EOS (reduction in unit cost)
• more efficient production - production line methods can save time changing tools and provide more specialised tools
• training costs reduced

Question 17

disadvantages of specialisation?

Answer 17

• repetitive tasks lead to boredom
• countries become less self-sufficient
• lack of flexibility
• structural unemployment

Question 18

if people specialize in the production of different products, then what becomes essential?

Answer 18

trade

Question 19

what is a barter economy?

Answer 19

In a barter economy, individuals or entities engage in trade by swapping one commodity or service for another, based on mutual needs and preferences.

Question 20

what type of economy is trade?

Answer 20

barter

Question 21

limitations of barter system?

Answer 21

Difficult to produce specialised goods as that is wanted by a small number of people
Indivisibility of goods and services. E.g. a cow for eggs?
Seasonal, e.g. can you store your vegetables for half a year?
Difficult to negotiate a price and you have to have a price for everything
E.g. 1 cow = 2 pig, 1 cow = 20 chicken, 1 cow = 23 ducks …
Each commodity may be different in quality and size, and thus values
Inefficient as it takes longer time to find the right trading partner at the right price with the right quantity

Question 22

what is trade?

Answer 22

the buying and selling of goods and services

Question 23

what is exchange?

Answer 23

to give something in return for something in received

Question 24

functions of money?

Answer 24

medium of exchange
measure of value/unit of account
store of value
standard of deferred payment