Y12 Booklet 1: Productivity, Efficiency & DoL Flashcards
What is “production”?
Raw output
What is “productivity”?
A measure of efficiency, of turning inputs -> outputs
What is the formula for Productivity?
Units of output / Units of input
What is the formula for Labour Productivity?
Units of output / Units of labour (e.g. man hours)
How can Labour Productivity be improved?
- training
- specialisation (DoL)
- improved supervision
What is Total Factor Productivity?
A measure of productivity, of each factor of production
What is the formula for Total Factor Productivity?
Units of output / units of factors of production (inputs)
What are the effects of higher productivity?
- lower avg. cost
- improved international competitiveness
- higher profits
- higher wages
- economic growth
What is Technical Efficiency?
The maximum possible output, with given factors of production
What is Productive Efficiency?
- achieving technical efficiency
AND - minimising average costs
What is Allocative Efficiency?
A combination of outputs which maximises consumer utility
What is the Pareto Optimum?
A point where every change has a trade-off. No output can improve without another deteriorating
What does Statically Efficient mean?
Efficient at any one time
What does Dynamically Efficient mean?
Becoming more efficient over time
What does X-Inefficiency mean?
In an uncompetitive market, a dominant firm would rather raise prices than lower avg. cost
Who observed Division of Labour?
Adam Smith
What is the Division of Labour?
Splitting production into a number of short processes, so each worker can focus on 1-2 tasks
Positives of Division of Labour
- increased output
- more skilled workers
- lower avg. costs
Negatives of Division of Labour
- workers get bored/demoralised
- less well-rounded workers
- risk of mechanisation
What is Specialisation?
Labourers focussing on tasks that they’re most skilled at
How is Division of Labour different to Specialisation?
A singular worker can be specialised to their trade, without needing to divide the process into many steps and use other workers
