Unit 3 Money and Banking(3.6-3.8) Flashcards
what are the factors of production
land,labour,capital,enterprise
Term for when the overall demand for factors of production depends on the demand for the final good or service
Derived demand
What does labor intensive production mean
When labor is the main factor of production
What kind of process requires relatively high level of skills and is flexible to the different needs of customers(Labour or capital)
Labour intensive production
What does capital intensive production require
high levels of investment and little human input
disadvantage of capital intensive production
they are inflexible(produce high quantities of standard products
What is production
the total output of a business
formula for productivity
output/input
2 factors productivity of a workforce will depend on
quality and quantity of capital equipment
way work is organised
training that workers have recieved
level of motivation
what ways will managers increase productivity
investing in equipment
using rewards to motivate workers
investing in training
making work more efficient
What is the formula for Total Cost(TC)
fixed costs+variable costs
what is fixed cost
they do not change with the level of output
what are variable costs
the cost of materials used in production, they do change with output
What is average cost and what is the formula
The measure of cost per unit(Total cost/output)
What does avg fixed costs do as output increases
it falls
What is revenue
it is the total income of the business(price per unit x number of units sold)
What is profit
the difference between revenue and costs( Revenue - costs)
What are the 4 business objectives
profit
social
growth
survival
What is profit maximisation
when there is the biggest possible difference between total revenue and total costs
why do firms want to earn profit
to reward the owners
to use as a source of funds
what determines the competitiveness of a market
how many firms are within it and their size
What do competitive markets lead to
more innovation since businesses try to improve what they offer
lower prices for consumers as businesses try to become more efficient so their prices can be lower then competitors
better quality products so businesses try to attract customers
What is a monopoly
when one firms dominates the market and has a high market share
Why can monopolies be dangerous
they can abuse their power and exploit their customers by pushing up the price
Why do monopolies lead to a lack of innvation
because there is no pressure to innovate since there arent other dominant firms
positives of monopolies
its power may come from being innovative and being better than other firms
it may encourage other businesses to be more innovative so they can replace the monopoly
it may be efficient and gain internal economies of scale
