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Economics Edexcel iGCSE > Production > Flashcards

Production Flashcards

1
Q

What is production?

A

Process of converting resources into goods and services

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2
Q

What are the 4 factors of production?

A
  1. Land
  2. Labour
  3. Capital
  4. Enterprise
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3
Q

What is land?

A

Earth’s natural resources (in and on it)

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4
Q

What is labour?

A

Human workforce

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5
Q

What is capital?

A

Equipment used in producing goods & services

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6
Q

Name 2 types of capital

A
  1. Working Capital

2. Fixed Capital

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7
Q

Give an example of working capital

A

Stocks of raw materials and finished goods

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8
Q

Give an example of fixed capital

A

Factories, shops, machines, tools and equipment

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9
Q

What is human capital?

A

Value of an individual worker to a business

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10
Q

How can you increase human capital?

A

Through training and education

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11
Q

What is enterprise?

A

Entrepreneurs = Willingness to take a risk to make a profit

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12
Q

What is capital intensive production?

A

Involves using relatively more capital than labour

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13
Q

What is labour intensive production?

A

Involves using relatively using relatively more labour than capital

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14
Q

What is productivity?

A

It’s the output per unit of input

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15
Q

How can production be increased?

A

By raising productivity: involves using factors more effectively

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16
Q

Why do firms try to increase productivity?

A

To lower costs and increase profits

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17
Q

How can firms increase productivity?

A

e.g. by introducing new working practices or investing in new machinery

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18
Q

What does the primary sector do?

A

Turns natural resources into raw materials for manufacturing (secondary) sector

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19
Q

Give 4 areas of work in the primary sector

A
  1. Mining & Quarrying
  2. Agriculture
  3. Fishing
  4. Forestry
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20
Q

What does the primary sector provide for the secondary sector?

A

Raw materials

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21
Q

What does the secondary sector do?

A

Turns raw materials into finished products

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22
Q

What is de-industrialisation?

A

Growth in tertiary sector at the expense of manufacturing

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23
Q

Name 4 reasons for de-industrialisation

A
  1. Competition from overseas
  2. Changes in consumer demand
  3. Advances in technology
  4. Growth in public employment
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24
Q

What does the tertiary sector do?

A

Provides support services for the extractive (primary) and manufacturing (secondary) sectors and to consumers

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25
Q

In developing countries, what is happening to primary, secondary and tertiary sectors?

A
  1. Declining primary sector production
  2. Increasing manufacturing
  3. Some growth in the tertiary sector
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26
Q

In developed countries, what is happening to primary, secondary and tertiary sectors?

A
  1. Sharply decreasing primary sector production
  2. Decreasing manufacturing
  3. Rapidly growing tertiary sector
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27
Q

Why do businesses need to define potential costs?

A

To make informed business decisions → to make profit

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28
Q

What are fixed costs?

A

Same at all levels of output in the short run

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29
Q

What are variable costs?

A

Costs of production that increase directly as output increases

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30
Q

Give two examples of a fixed cost

A

Insurance, Rent, Salaries, Taxes, Loans

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31
Q

Give two examples of a variable cost

A

Piece rate labour, Commissions, Direct materials, Electricity, Telephone

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32
Q

Draw a fixed cost curve

A

See mind map

33
Q

Draw a variable cost curve

A

See mind map

34
Q

What are changing costs?

A

Costs that change over a period of time as a business grows and develops

35
Q

Explain how a fixed cost in the long run may change?

A

Factors may vary e.g. capacity may be increased

36
Q

Direct cost are usually…

A

Variable e.g. Materials

37
Q

Indirect cost are usually…

A

Fixed e.g. Rent

38
Q

What are indirect costs as known as?

39
Q

What is an accounting cost?

A

The value of an economic resource used up in production

40
Q

How do you work out profit?

A

Total Revenue (TR) - Total Costs (TC)

41
Q

How do you work out total revenue?

A

Price x Quantity

42
Q

What is total revenue?

A

Total income earned by the business

43
Q

What are total costs?

A

All the costs of production over a period of time

44
Q

How do you work out total costs?

A

TC = VC + FC

45
Q

What is an average cost?

A

Cost of producing a single unit

46
Q

How do you work out an average cost?

47
Q

What is economies of scale?

A

As production output increases, average costs decrease

48
Q

What is internal economies of scale?

A

Cost benefits enjoyed by a single firm when it expands

49
Q

Name the 6 internal economies of scale

A
  1. Marketing Economies
  2. Technical Economies
  3. Managerial Economies
  4. Financial Economies
  5. Purchasing Economies
  6. Risk-bearing Economies
50
Q

Explain how marketing economies of scale works

A
  1. Advertising = fixed cost → spread over more units for larger firms = cost per unit is lower
  2. Larger firms benefit from brand awareness - products are trusted by consumers → doesn’t need to advertise as much to get sales
51
Q

Explain how technical economies of scale works

A

Occurs when a business invests in new technology and is able to increase production → production costs per unit will fall

52
Q

Explain how managerial economies of scale works

A

Larger firms can employ specialist managers to take of different areas of business → they gain expertise and
experience in specific area of business → better decision-making abilities in that area

53
Q

Explain how financial economies of scale works

A

Occurs when a large business can borrow money at a lower rate of interest than a smaller business

54
Q

Explain how purchasing economies of scale works

A

Larger firms making lots of goods will need larger quantities of raw materials = buy in bulk → negotiate discounts with suppliers

55
Q

Explain how risk-bearing economies of scale works

A

Occurs when a business produces a range of products → not dependant on just one product

56
Q

When do external economies of scale occur?

A

Occurs when a whole industry grows

57
Q

Draw curve an average cost curve to represent economies/diseconomies of scale

A

See mind map

58
Q

Name the 4 examples of external economies of scale

A
  1. Skilled Labour
  2. Infrastructure
  3. Commercial Services
  4. Cooperation
59
Q

Explain how skilled labour is an example of external economies of scale

A

There may be build up of labour which has skills and work experience needed by that industry = helps cuts training costs

60
Q

Explain how infrastructure is an example of external economies of scale

A

Better transport network suited/servicing a industry = decrease in costs for a company working within that industry

61
Q

Explain how commercial services is an example of external economies of scale

A

Specialist suppliers will be attracted to the area = external cost saving

62
Q

Explain how cooperation is an example of external economies of scale

A

When firms in same industry are located close to each other, they may cooperate more e.g. by sharing an R & D centre

63
Q

What is diseconomies of scale?

A

When average costs begin to rise as (a firm gets too big) inefficiencies occur

64
Q

Name 3 reasons for diseconomies of scale

A
  1. Control and Coordination
  2. Labour Relations
  3. Bureaucracy
65
Q

Explain how bureaucracy can lead to diseconomies of scale

A

Large firms may become more bureaucratic = decision-making and communication may become slower

66
Q

Explain how a lack of control and coordination can lead to diseconomies of scale

A

Large firms with thousands of employees and dozens of factories all over the world may be difficult to keep under control and coordinate

67
Q

Explain how poor labour relations can lead to diseconomies of scale

A

Relations between workers and managers may worsen e.g. the needs of individual workers may be neglected &
their motivation may suffer

68
Q

How can a nation’s wealth be increased?

A

By improving its productivity

69
Q

Name 3 areas of productivity that a nation can improve

A
  1. Land
  2. Labour
  3. Capital
70
Q

What are 4 ways the productivity of land can be improved?

A
  1. Irrigation can divert water in rivers or lakes to unproductive land
  2. Fertilisers and pesticides can raise crop yield
  3. Flooded land (e.g. swampland) can be drained and then farmed
  4. Disease-Resistant and higher-yielding GM crops can be
    grown
71
Q

How do you increase labour productivity?

A

By improving the quality of human capital

72
Q

What are 3 ways the productivity of labour can be improved?

A
  1. Education and Training
  2. Improve Motivation of Workers
  3. Improve Work Practices
73
Q

How can we improve the motivation of workers?

A

Financial incentive schemes (e.g. price rates) or non-financial methods (e.g. job rotation and team working)

74
Q

How can we improve work practices?

A

Changing factory layout to improve flow of production or

making labour more flexible

75
Q

How do you increase capital productivity?

A

By improving the sectors

76
Q

How can you improve the primary sector?

A

In agriculture: machinery, irrigation, computerised lacking of livestock, fertilisers & pesticides have helped to increase output

77
Q

How can you improve the secondary sector?

A

Flow production, robots, computer numerically controlled machines & computer integrated machinery are used to raise output

78
Q

How can you improve the tertiary sector?

A
  1. Online shopping has improved productivity in retailing and banking
  2. Dramatic advances in medicine and surgical technology have raised productivity in healthcare
79
Q

How do you work out labour productivity?

A

No. of workers

Economics Edexcel iGCSE (8 decks)

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