Production Flashcards
What is production?
Production converts inputs, or the services of factors of production such as capital and labour, into final output.
What are the outputs?
The outputs can be capital goods. But they will be used as inputs in the production to produce consumer goods.
Difference between consumer and capital goods?
Consumer goods : Goods for consumption
Capital goods : Goods for further production
What are producers?
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).
What is the meaning of productivity?
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.
What does a greater productivity mean?
Means more goods could be produced with the same amount of inputs employed.
Equation for labour productivity?
output per unit of labour employed = Total output / Total unit of labour
What can labour productivity be used for?
It can be compared against another firm, another industry or another country.
What factors affect labour productivity? Individual level.
Individual level : compensation (salary/wage), work environment, training, career development opportunities, wellness, diversity, increased responsibility, and management quality.
What factors affect labour productivity? Firm level.
capital-labour ratio, training, supervision and monitoring, management, payment methods, environment, working ethics and culture.
What is the productivity gap?
It is the difference between labour productivity in the UK and in other developed countries.
What is specialisation?
Specialisation occurs when a country (or a region) /firm decides to focus on making a particular good/service with a relative advantage.
What is division of labour?
The division of labour occurs when the production process of a good is broken down in to various small tasks.
What is capital widening?
involves greater investment to make use of existing technology and increase the amount of capital available.
What is capital deepening?
Attempts to increase output through better technology and higher output per worker, for example, a new technology which makes capital more productive.
What are the advantages of specialisation?
- 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
disadvantages of specialisation?
- repetitive tasks lead to boredom
- countries become less self-sufficient
- lack of flexibility
- structural unemployment
if people specialize in the production of different products, then what becomes essential?
trade
what is a barter economy?
In a barter economy, individuals or entities engage in trade by swapping one commodity or service for another, based on mutual needs and preferences.
what type of economy is trade?
barter
limitations of barter system?
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
what is trade?
the buying and selling of goods and services
what is exchange?
to give something in return for something in received
functions of money?
medium of exchange
measure of value/unit of account
store of value
standard of deferred payment
