Unit 3- Production Flashcards
Define production
Converts inputs or factor services into output of goods and services
Define short run production
Occurs when a firm adds variable factors of production to fixed factors of production
Define long run production
Occurs when a firm changes the scale of all the factors of production
Define productivity
Output per unit of input
Labour/capital productivity
Output per worker or unit of capital
Define productivity gap
The difference between labour productivity in the UK and other developed economy’s
Define specialisation
A worker only performing one task or a narrow range of tasks. Also different firms specialising in producing different goods or services
Define division of labour
This concept goes hand in hand with specialisation. Different works perform different tasks in the course of producing a good or service
Define exchange
To give something in return for something else eg money is a form of exchange
Define short run
The short run is the time period in which at least one factor of production is fixed and cannot be varied
Define long run
The long run is the time period in which no factors of production are fixed and in which all the factors of production can be varied
Define fixed cost
Cost of production which in the short run doesn’t change with output
Define variable cost
Cost of production which changes with the amount that is produced even in the short run
Define total cost
The whole cost of producing a particular level of output
Define average cost
The total cost of production divided by output
Define long run average cost
Long run total cost divided by output
Define economy of scale
As output increases long run average cost falls
Define diseconomy of scale
As output increases long run average cost rises
Define technical economy of scale
A cost saving generate through changes to the productive process as the scale of production and the level of output increases
Define internal economy of scale
Cost saving resulting from the growth of the firm itself
Define external economy of scale
Cost saving resulting from the growth of the industry or market of which the firm is a part of
Define total revenue
All the money recorded by a firm from selling its total output
Define average revenue
Total revenue divided by output in a single product firm average revenue equals the price of the product
Define profit
The difference between the total sales revenue and total cost of production
Define technical economy of scale
A cost saving generated through changes to the productive processes as the scale of production and level of output increases
Define internal economy of scale
Cost saving resulting from the growth of firm itself
External economy of scale
Cost saving generated resulting from the growth of the industry or market of which the firm is a part of
