Production, Costs & Revenue

Question 1

Productivity & Specialisation

Answer 1

• productivity = output per worker over a given time period
• ^ increased by training workers & using better capital machinery
• lowers average cost per unit
• specialisation introduced by Adam Smith
• ^ concentration of production
• workers specialise so output
  increases (productivity increases)

Question 2

Specialisation 2

Answer 2

• workers, firms & countries can specialise
• focused production
• ^ better quality products
• results in ‘economies of scale’ - more competition between firms
• countries can become over-dependent on export of one commodity
• ^ trade is not mutually beneficial

Question 3

Division of Labour

Answer 3

• different workers performing different tasks to produce one good/service
• after specialisation takes place
• workers can be complimented with machinery to maximise productivity
• workers motivation may decrease
• increases structural unemployment - skills may not be transferable
• ^ also higher work turnover
• loss of ‘bespoke touch’

Question 4

Money

Answer 4

• medium of exchange
• measure of value
• puts value on labour too
• allows for payments to be made later e.g. Klarna