production (2.6) Flashcards
what is profit
The amount of money a producer has left after all the costs have been paid
what is productivity
one measure of the degree of efficiency in the use of factors of production in the production process.It is measured in terms of output per unit of input
what will an increase of production bring about in an economy
- an increase of employment
- increase in profits for firms
- large economies of scale
- increase in market share if one firm has higher productivity than others
- economic growth
- rise in standard of living
how is productivity measured
total output/ total input
what are the costs of productivity
- if a firm achieves increased productivity through capital and new machinery this may lead in unemployment as employees will be replaced by the technology
- more productivity also may lead to higher international competitive resulting in other countries to retaliate causing a fall in gdp
how can producers increase productivity
- worker specialisation in the production process
- investment in new tech
- improving the skills of workers through training
what is average cost
the cost of producing a unit
what is total cost
all the costs of the firm added together
what is total revenue
the total income of a firm from the sales of its goods or services
average cost formula
ac= total cost/ quantity
total revenue formula
tr= price x quantity
total cost formula
tc=total fixed cost / total variable cost
what is average revenue
the revenue per unit sold
average revenue formula
total revenue / quantity
what is loss
when a firms revenue is less than its costs eg. tr
profit formula
total revenue - total cost
what are economies of scale
the cost advantage a firm can gain by increasing the scale of production, leading to a fall in average cost
what are technical economies
larger firms are able to buy expensive technical equipment as the cost can be spread across a large output
what are economies of increased dimension
Increasing the dimensions of any structure will lead to a proportionately larger increase in capacity. e.g. increasing the size of a box from 2m x 2m to 4m x 4m increases the surface area by a factor of 4 while the capacity increases by a factor of 8.
what is bulk buying
buying goods in bulk means the cost per unit will decrease
what is the division of labour
larger firms are able to split workers up into separate tasks that their employees become specialised and this will result in higher productivity
what is financial economies
larger firms are able to borrow more money from banks easier than smaller firms an also with a lower rate of interest.This is because big firms are seen as less of a risk than little firms
what is managerial economies
larger firms can afford more specialist staff for functions like finance and marketing
what is marketing economies
larger firms are able to use more expensive and efficient marketing methods
what are risk bearing economies
larger firms are able to spread the risk by offering a range of products therefore if one product fails there are others to rely on
what are research and development economies
larger firms could afford to have their own research and development departments
