production & productivity Flashcards
Production
turning an input into an output
Productive efficiency
producing the largest output at the lowest point on the cost curve.
Labour productivity formula
total output / units of labour
Factors affecting productivity levels
- competition levels in a market
- Improvements in stock of capital inputs
- specialisation of labour
- strength of demand
Benefits of productivity
*Increased profits
*Increased real wages
*Lower average costs
*Improved competition in international markets
What is the short run in micro?
A period of time where one of the FOP’s remains fixed.
What is the long run in micro?
A period of time where all of the FOP’s are variable, reducing / expanding the production capacity.
Average costs of production and its formulae
The Per unit cost of production, obtained by dividing total costs by output
Division of labour
When the production process is split down into separate tasks after specialisation.
Advantages:
Higher productivity and efficiency
Economies of scale
Disadvantages:
Risk of worker alienation
Structural employment when skills become obsolete.
Internal Economies of scale
Marketing EOS
Managerial EOS
Technical EOS
Financial EOS
Risk-bearing EOS
Internal Diseconomies of scale
Motivation EOS
Communication EOS
Coordination EOS
Control EOS
External economies of scale
Infrastructure EOS
Supply EOS
Innovation EOS
Lobbying EOS
External diseconomies of scale
Pollution
Strains on infrastructure
High factor prices.
Allocatively efficient
Producing the optimal amount to meet consumer wants. where price is equal to marginal cost . (AR=MC) or (D = S).
Dynamic efficiency
reducing the cost curve by implementing new production processes. (MR = MC supernormal profits)
