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Economics > PRODUCTION, ECONOMIC RESOURCES AND RESOURCE ALLOCATION > Flashcards

PRODUCTION, ECONOMIC RESOURCES AND RESOURCE ALLOCATION Flashcards

1
Q

production

A

Production involves the use of resources to produce goods and services for consumption.

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2
Q

productivity

A

Productivity is the measure of the efficiency of output that can be obtained from using productive resources.

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3
Q

define “factors of production”

A

economic resources required to produce goods: (human and non-
human).

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4
Q

list the factors of production

A

land, labour, capital, enterprise

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5
Q

rewards of factors of production

A

land: rent
labour: wages and salaries
capital: interest
enterprise: profit

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6
Q

land

A

land refers to a range of natural resources.

Example: oil, water, farm land

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7
Q

characteristics of land

A
  1. it is not man-made

2. the quantity of land is not fixed

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8
Q

importance of land

A

all goods and services that society used involves some natural resources

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9
Q

define productivity of land

A

the productivity of land is a measure of output that can be produced by a given unit of land.

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10
Q

how is productivity of land measured?

A
  1. in terms of physical product that is how many units of output the land will produce
  2. in terms of revenue product that is the value of the physical product when it is sold
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11
Q

how can productivity of land be produced

A
  1. by altering its physical characteristics

2. by combining the land with more advanced forms of technology

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12
Q

labour

A

Labour refers to the physical and mental efforts made by workers in the production process

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13
Q

types of labour

A
  1. skilled labour
  2. unskilled labour
  3. physical labour
  4. mental labour
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14
Q

productivity of labour

A

the output per worker per unit of time

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15
Q

productivity of labour depends on….

A
  1. the quality of the other factors with which labour is working
  2. the amount of training and skills the labour has
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16
Q

ways to increase the productivity of labour

A
  1. increasing the wages of workers: workers are motivated to raise their productivity
  2. improving working conditions
  3. offering promotion opportunities: motivate workers to perform better at their jobs
  4. providing sufficient education and proper training opportunities to workers: training opportunities for workers to enhance their skills which would increase productivity
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17
Q

supply of labour

A

labour is supplies by the number of people in a country who are available for employment (labour
force)

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18
Q

division of labour

A

division of one task into smaller tasks

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19
Q

specialization

A

focusing on one task and becoming an expert at it

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20
Q

advantages of division of labour

A
  1. increase in output
  2. use of machinery: machines can be designed to help workers perform specific tasks
  3. increase in productivity: workers performing repetitive task soon become experts becoming more efficient
  4. employment opportunities: more jobs are created each requiring different skills
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21
Q

disadvantages of division of labour

A
  1. doing repetitive work might be boring and monotonous
  2. stifles creativity
  3. causes immobility of labour: workers can be easily immobilized if they are removed form their job due to technological advances. Finding another job may be difficult as their skills might not relevant for other jobs
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22
Q

capital

A

capital includes all items that are into producing other goods and services

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23
Q

characteristics of capital

A
  1. tend to be durable

2. tend to be very expensive and are usually funded by loans.

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24
Q

investment

A

the purchase of capital goods by a business

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25
Q

types of capital

A
  1. fixed capital: items that are durable and are used over a fairly long period of time
  2. working capital: items that must be replaced on a day to day basis after use
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26
Q

accumulation of capital

A

capital is accumulated by investment. as more and more capital is accumulated capital formation occurs. this refers to an increase in the amount of capital available for production. capital formation will eventually increase the productive capacity of the economy. if the business chooses to avoid interest payment charged by banks on investment they may opt to fund capital accumulation using their savings

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27
Q

importance as a substitute for

labour

A

some industries are labour intensive while others are capital intensive. Automatic machinery (capital) has replaced many workers. while this results in increased production. It is at the cost of many people loosing their jobs

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28
Q

entrepreneurial talent

A

brings all other factors of production. An entrepreneur decides how the other factors of production are going to be used to produce goods and services.

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29
Q

functions of entrepreneur

A
  1. takes risks and is responsible for all decisions that need to be taken
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30
Q

primary sector

A

industries involved in exploring for and mining of natural resources.
Example: fishing, farming, mining

31
Q

secondary sector

A

industries involved in producing a finished product from primary products.
Example: turning cotton into clothes, turning cocoa beans into chocolate.

32
Q

tertiary sector

A

industries that provide a service and not a physical product
Example: hairdressing, teaching, plumbing

33
Q

short run

A

the period of time when a firm can increase some of its factors of production but not all. There is at least one fixed factor of production while others a variable

34
Q

long run

A

the period of time when a firm can increase all of its factors of production. All factors of production are variable

35
Q

cost of production

A

this is the sum or total of all the factors used to produce a goods / service

36
Q

fixed cost

A

the cost that does not change or vary as output varies

Example: rent

37
Q

variable cost

A

cost that changes as output changes

Example: ingredients/raw materials

38
Q

total cost

A

the sum of all costs incurred by a firm in producing a certain level of output.

39
Q

average cost

A

the per unit cost of production obtained by dividing the total cost by the total output

40
Q

average cost calculation

A

AC=TC/Q

41
Q

variable cost calculation

A

?

42
Q

marginal cost calculation

A

MC=∆C/∆Q

43
Q

fixed cost

A

?

44
Q

total cost

A

?

45
Q

free goods

A

one that is readily available to customers that they do not pay for nor make a sacrifice to use

46
Q

economic goods

A

one that must be paid for and the consumer will have to sacrifice another good in order to consume it

47
Q

consumer goods

A

these goods are purchased for direct use from the consumer. she herself will be using it

48
Q

producer goods

A

(aka capital goods) these goods are used to produce other goods
Example wood

49
Q

resource allocation

A

this refers to how economies allocate scarce resources for which they can be used.

50
Q

economic questions

A
  1. what to produce
  2. how to produce
  3. for whom to produce
51
Q

economic systems

A
  1. traditional / subsistence
  2. planned / command
  3. free market
  4. mixed economy
52
Q

traditional economy

A

an economy based on traditions and customs where nearly the whole population is engaged is agriculture, producing just enough food for their own needs

53
Q

command economy

A

economic resources owned, planned and controlled by the state

54
Q

characteristics of command economy

A

t

55
Q

Types of business organizations in a free market.

A

1) sole proprietorship
2) partnership
3) limited company
4) co-operative
5) public corporation

56
Q

sole trader

A

1) sole proprietorship - The owner manages and controls the organization for his profit. He bears all risks makes all decisions and must consider the
economic questions

57
Q

partnership

A

2) partnership - More than one person has ownership and participation in the business due to the need of help or more capital.

58
Q

limited liability

A

3) limited company - Raises larger sums of money for large - scale production. Capital id obtained by the sale of shares to investors

59
Q

co-operative

A

4) co-operative - an association of people who have come together for the purpose of buying goods at lower prices, selling goods they produce, rendering services to its members.

60
Q

public corporation

A

5) public corporation - state owned organizations that are free to run their own affairs based on guidance from the government. (water, gas, electricity, transportation)

61
Q

economies of scale

A

the cost saving a firm benefits from expanding its scale of production in the long run

62
Q

diseconomies of scale

A

the disadvantages or cost increases that accrue to a firm as it grows in size and scale.

63
Q

types of economies of scale

A
  1. technical economies of scale: the ability to make use if new technology which is not available to smaller businesses
  2. marketing economies of scale:
  3. managerial economies of scale:
  4. financial economies of scale:
64
Q

types of economies of scale

A
  1. technical economies of scale: the ability to make use if new technology which is not available to smaller businesses
  2. marketing economies of scale:
  3. managerial economies of scale:
  4. financial economies of scale:
65
Q

diseconomies of scale

A

the disadvantages or cost increases that accrue to a firm as it grows in size and scale.

66
Q

economies of scale

A

the advantages or cost savings a firm benefits from expanding its scale of production in the long run

67
Q

types of economies of scale

A
  1. technical economies of scale
  2. marketing economies of scale
  3. managerial economies of scale
  4. financial economies of scale
68
Q

technical economies of scale

A

the ability to make use if new technology which is not available to smaller businesses

69
Q

marketing economies of scale

A

occur when larger firms are able to lower the unit cost of advertising and promotion perhaps through access to more effective marketing media.

70
Q

diseconomies of scale

A

the disadvantages or cost increases that accrue to a firm as it grows in size and scale.

71
Q

marketing economies of scale

A

occur when larger firms are able to lower the unit cost of advertising and promotion perhaps through access to more effective marketing media

72
Q

managerial economies of scale

A

occur when large firms can afford specialists. A large scale firm may be able to employ managers and supervisors to manage various department

73
Q

financial economies of scale

A

the company has cheaper access to capital. They can acquire funds on several ways such as through the sale of shares as well as they obtain loans at cheaper interest rates from bank as opposed to smaller firms

Economics (8 decks)

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