Production and productivity

Maya Khangura
Flashcards by Maya Khangura, updated more than 1 year ago
Maya Khangura
Created by Maya Khangura almost 6 years ago


Specialisation, trade and exchange, costs (avc), economies and diseconomies, returns to scale

Resource summary

Question Answer
What is production? Converts inputs (factors of production) into outputs (goods and services)
What does production involve in the short run? Adding variable factors of production to fixed factors
What does production involve in the long run? All factors of production are variable so production involves changes in scale
How is the short run defined? The time period where one of the factors of production are fixed
How is the long run defined? The time period where no factors of production are fixed - all factors are variable
What is productivity? Rate of production
How is productivity measured? Output per unit of input
How can productivity be measured- which is most commonly used? For all factors of production Labour productivity output per worker
What is productivity a measure of? Competitiveness
The higher the rate of productivity... (effect on costs) (2) the lower the unit cost of production and therefore the lower the price that can be offered to consumers
What is specialisation? When we concentrate on a product or task
What does the productivity gap measure? The differences in labour productivity across a number of countries
Where can specialisation happen? At all levels of economic activity
Give example of this (4) 1) Specialisation of tasks within extended families in many of the worlds poorest countries 2) Within businesses and organisations 3) In a country 4) In a region of a country
Give an example of specialisation within businesses and organisations Mass manufacturing of vehicles Building industry
Give an example of specialisation within a country USA is a leading country in shale oil and gas supplier Bangladesh major producer and exporter of textiles
Give an example of specialisation within a region of a country West midlands has been a centre for more car assembly
How can we increase productivity? (2) Better training/ management Improved technology
When does the division of labour occur? Where production is broken down into many separate tasks
What can the division of labour raise- why? The output per person as people become more efficient through constant repetition of a task
What is this process called? Learning by doing
What does this gain in productivity result in? Lower the supply cost per unit
What should reduced supply costs lead to? Lower prices for consumers of goods and services causing gains in economic welfare
What are advantages of specialisation? (3) 1) Higher labour productivity 2) Creates surplus output that can then be traded internationally 3) Lowers prices
Why is higher labour productivity an advantage of specialisation? (3) Learning by doing increases output per hours worked Higher productivity lowers the unit cost of supply Increased productivity leads to higher profits for businesses
Why is the creation of surplus output an advantage of specialisation? (3) Surplus can be traded internationally Theory of comparative advantage Business/countries specialise in areas of relative advantage
Why are lower prices an advantage of specialisation? (3) Higher real incomes Real GDP growth Lower prices
What are the disadvantage of specialisation and the division of labour? (3) 1) unrewarding, repetative, work that requires little skill can lower motivation, lowering quality and eventually lower production 2) Lack of flexibility- workers struggle to adapt to new jobs (structural unemployment) 3) countries can become less self sufficient- problem in trade unexpec stops
Why is trade and exchange necessary? For specialisation to become economically worthwhile
What is a way of achieving this- what does this require? Barter was a simple method of achieving this, but requires a double coincidence of wants- larger the community the less likely this is to occur
If there is a increase in specialisation what happens to productivity? Increase productivity - LRAS shifts out Show this on a diagram
What is money? Money is a means of exchange that facilitates trade and exchange
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