Production Ch9 Flashcards
Production
The process of turning resources into goods or services
Consumer goods
Satisfy consumers wants directly
Capital goods/ producer goods
Producing other goods and services
Primary production
Direct extraction of natural resources
Secondary production
Turning raw materials into semi-finished or finished products
Tertiary production
Provision of services
Factors of production
Refers to all the resources used in production
Labour
Human effort, both mental and physical
Return: salary
Land (properties of land)
All the natural resources that are used in production
Return : rent
Capital
All man-made resources used in production
Return : interest
Entrepreneurship
Organises other factors of production ,makes final decision and bears risk
Return: profit
Geographical mobility
How easily a factor of production can move from one place to another
Occupational mobility
How easily a factor of production can change from one job to another
Labour supply
Labour supply = number of worker x working hour of each worker
Labour productivity
Productivity of labour = total output divided by total labour supply
Better working environment, better health of labours and high-quality of other factors of production
Lack of education and training and bad working environment
Piece rate
Advantage to employers: more output is produce because workers have strong incentive and cost of supervising will be lower
Disadvantage: workers emphasise quantity instead of quality so the product quality will be lower ,higher cost of controlling product quality and increase the cost of measuring contribution.
Advantage to employee : fair system
Disadvantage : workers income is not stable
Time rate
Employer advantage: saves cost of measuring workers contribution and concentrate on the quality of the product
Disadvantage : worker incentive is lower therefore decreases their productivity and cost of supervising will be higher
Employee advantage: workers income will be stable
Disadvantage : lower incentive to work
Profit-sharing scheme
Advantage to employer: strong, working incentive and business risk can be shifted to the workers
Disadvantage : increases the cost of measuring contribution
Advantage to employee: workers can earn more if firm earns a larger profit
Disadvantage: risk is very high as no income if no profit is made
Division of labour advantage and disadvantage
Advantage-
Right person on the right job
Practice makes perfect
Machines are fully utilised
Amount of tools can be saved
Save production time from training and moving around different tasks 
Disadvantage
Monotonous
Interdependence
Unemployment
Loss of craftsmanship
Definition of division of labour
Division of labour is a production system in which workers specialise in
producing a good or in a stage of production of a good.
