Production, costs and revenue Flashcards
What are the three types of production?
Primary production – Extraction of natural resources (e.g., agriculture, mining)
Secondary production – Manufacturing and industrial processes (e.g., car production)
Tertiary production – Services (e.g., retail, banking)
What is the definition of production?
Production is the process of converting inputs (such as raw materials, labour, and capital) into final output (goods and services)
What is the definition of productivity?
Productivity measures efficiency in the production process, usually calculated as output per unit of input over a given period of time
What is labour productivity?
Labour productivity is the output per worker (or per hour worked) over a given period of time.
What factors affect labour productivity?
Investment in capital – Better machinery improves efficiency.
Education & training – Skilled workers are more productive.
Technology & innovation – Automation reduces production time.
Specialisation & division of labour – Workers focusing on specific tasks increase efficiency.
Motivation & working conditions – Incentives and better conditions improve output.
What are the benefits of increased productivity?
Lower unit costs – Reduces production costs, increasing competitiveness and profits.
Economic growth – Higher productivity leads to higher output and higher wages.
Higher wages and living standards – Increased efficiency often leads to higher incomes.
What are the four types of integration?
Horizontal Integration – A firm merges with or acquires another firm at the same stage of production (e.g., two car manufacturers merging).
Vertical Integration – A firm expands into a different stage of production.
Forward vertical integration – Merging with a company closer to the consumer (e.g., a car manufacturer buying a car dealership).
Backward vertical integration – Merging with a supplier (e.g., a car manufacturer buying a tyre company).
Conglomerate Integration – A firm merges with a business in a completely different industry (e.g., a car manufacturer merging with a soft drinks company).
