Production + Factors Of Production Flashcards
Production
Activity through resources ( input ) are transformed into goods and services ( output )
Consumer goods
Satisfy consumer’s wants directly
Producer goods
To help production of other goods and services
Private goods
Rivalrous in consumption
1. One’s consumption of the good reduces the amount for other’s consumption
2. Owners can prevent non - payers for consuming the good at an affordable cost
Public goods
Non - rivalrous in consumption
1. One’s consumption of the good do not reduce the amount available for other’s consumption
2. Owners cannot prevent non - payers for consuming the good at an affordable price
Primary production
Direct extraction of natural resources
Secondary production
Turning raw materials into semi - finished or finished goods
Tertiary production
Provision of XX** services
Simple division of labour
Workers specialize in producing a particular good or services
Regional division of labour
When a country/ city specializes in producing a particular good or service
Advantages of division of labor ( 3 )
- Choose the most suitable person for the job
- Practice makes perfect
- Stimulus to mechanization
-> all increase labor productivity
Land
Natural resources that can be used in production
Factor income: rent
-> zero OC, cannot be increased artificially
Capital
Man - made resources that can be used to help** production
Factor income: interest
-> increase labor productivity, investment forgoes present for more future consumption
Entrepreneurship
Human efforts in bearing business risks involved in production ( and make major production decisions )
Factor income: profit
-> uncertain return, manage other factors of production
Labor
physical and mental human effort provided by a worker during production
Factor income: wage
Unit: man - hours/ XX
Factors affecting labor supply ( 6 )
COMPARATIVE SENSE**
Labor force:
1. admit full time students
2. Years of schooling or training
3. Legal Retirement age
Working hours:
4. Number of public holidays/ leaves
5. Maximum working hours
6. Policies that encourage employees working overtime
Labour productivity ( 5 )
- Education and training
- More high quality machines and tools -> increase capital output
- Specialization ( division of labor )
- Better working environment
- Higher working incentive
Time rate + advantage ( 2 ) + disadvantage ( 2 ) + application
Workers are paid based on their working hours -> suitable when higher quality of work is required, output is not standardized and costly to measure
Advantages:
1. The cost of calculating output ( wage payment + monitoring quality of output ) will be lower when the tasks of workers are not standardized
2.stable income for workers as they will still receive a basic salary if the firm does not make a profit
Disadvantages:
1. Workers with higher productivity cannot receive higher income
2. Higher monitoring cost as workers tend to shrink.
Piece rate + advantage + disadvantage + application
Workers are paid according to the amount of their output -> when output is standardized and easy to measure, product quality can be easily monitored
Advantage:
1. Low monitoring cost as workers have higher incentive to work
2. Higher output will yield higher income
Disadvantage:
1. Lower quality of products might be produced as workers may focus on the quantity rather than the quality of products
2. Workers will have unstable income when output level is low
Occupational mobility + factors ( 5 )
Willingness and ease of labor to change from one occupation to another
1. Education and training
2. Degree of specialization
3. Market obstacles ( entry barriers )
4. Cost of changing jobs
5. Availability of information about the job vacancies
Geographical mobility + labor factors ( 4 )
The willingness and ease of labor to change from one workplace to another
1. Language and cultural differences
2. Transport network + transport cost
3. Immigration and emigration control ( entry barriers to a country )
4. Availability of labor market information
Profit sharing scheme + advantage + disadvantage + application
Workers are paid with a portion of the firm’s profit
Advantages:
1. Spread business risk between the employer and employees as wen the firm is making less profit, the wage of the employee will decrease
2. Lower monitoring cost as the workers have higher incentive to work since they are rewarded by a higher profit with better performance
3. Earn more when the firm earns a higher profit
Disadvantages:
1. Higher cost of calculating wage payments as the system is complicated
2. Unstable income as they have a higher risk of income fluctuation depending on the firms profit
Complex division of labor
Different workers specializes in producing a particular production** stage of good or service
Disadvantages of Division of labor
- Greater risk of unemployment <- as their set of skills is narrow and it would be difficult to find new jobs
- Monotony. The workers repeatedly do the same task and looses job satisfaction
- ( for employers ) Over - interdependence between different production stages. When disruption occurs in one production stage, other stages also suffer
Limitations of the division of labor ( 2 )
- Size of the market -> limited extent of division of labor since a small output is sufficient to satisfy a small market demand.
- Nature of the market -> production that requires individual creativity is less suitable for division of labor
Basic salary plus commission + application
Workers are paid with a combination of time rate and profit sharing
-> used to stabilise worker’s income and maintain a team of staff
Same adv + dis as profit sharing
