Production, costs and revenue 4.1.4 Flashcards
What is production?
The process of converting inputs into outputs
What is productivity?
output per unit of input
What is specialisation?
Focusing on narrow range of tasks
What is division of labour?
Different workers focus on performing different tasks in the course of producing a good or service
What is exchange?
To give something in return for something else
What is the medium of exchange?
A commonly accepted method of payment that allows goods to be traded without the need to barter
How can specialisation increase productivity?
improve skills needed to complete a task:
.produce quicker
.fewer mistakes/less waste/better quality
Disadvantage of Specialisation
workers may be offset by motivation/ boredom issues and repetitiveness
explain why specialisation necessitates an efficient means of exchanging goods and services
without a medium of exchange, trade relies on a double coincidence of wants . This may be rare meaning trade is restricted. With specialisation, trade is required for businesses/people/countries to get the variety of goods needed to function.
What is the law of diminishing marginal returns
adding a variable factor of production to a fixed factor of production will eventually lead to marginal returns falling
What are marginal returns?
The increase in total output that results from adding an extra worker or an extra unit of another factor
What are total returns?
The total amount of output produced
What are average returns?
Total output divided by the number of workers
What are returns?
Another word that means output
What is short run?
The time period when at least one factor of production is in fixed supply
What is long-run?
The time period when it is possible to alter all factors of production
What is increasing scale?
a firm taking the long-run decision to invest in increasing the amount of ALL factors of production
What is decreasing returns to scale
Where an increase in the scale of all factors of production employed leads to a less than proportional increase in output
What is constant returns to scale?
Where an increase in the scale of all factors of production employed leads to a proportional increase in output
What is increasing returns to scale?
Where an increase in the scale of all factors of production employed leads to a more than proportionate increase in output
What could an increase in returns to scale be caused by?
Being able to afford: better tech, better workers. Therefore increases productivity
What could a decrease in returns to scale be caused by?
problems with: communication, co-ordination, control, complexity. Therefore decreasing productivity
What is a cost?
An amount of money that a business spends to make a product or provide a service
What is a fixed cost?
Costs of production that do not vary when the number of products made changes
