Unit 5 overview

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Production Methods
Production is about creating goods and services
Job production where items are made individually and each item is finished
before the next one is started. Designer dresses are made using the job
production method.
Batch production where groups of items are made together. Each batch is
finished before starting the next block of goods. For example, a baker first
produces a batch of 50 white loaves. Only after they are completed will he or she
start baking 50 loaves of brown bread.
Flow production where identical, standardized items are produced on
an assembly line. Most cars are mass-produced in large factories using
conveyor belts
Small firms operating in the service sector, such as plumbers, use job
production because each customer has individual needs. Niche manufacturers of
items such as made-to-measure suits would also use job production because
each item they make is different.
Batch production is used to meet group orders
Flow production is used to mass produce everyday standardized (all the same)
items such as soap powder and canned drinks
Economies of scale reduce the price of production by producing more goods.
Economies of scale lead to lower unit costs and prices. Not many small
manufacturers can afford the investment needed to mass produce goods. They
instead opt for either batch or job production.
The challenge facing all businesses is to remain competitive. They must keep
prices competitive while offering a better service than rivals.
Market prices depend on levels of supply and demand
A market is any place where buyers and sellers meet to trade products
The market price is the amount customers are charged for items and depends
on demand and supply.

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Demand is the amount of a product customers are prepared to buy at different
Supply is the amount of a product businesses are prepared to sell at different
The goods market is where everyday products such as DVDs are traded.
The market is commodities where raw materials such as wheat are traded
An increase in demand following a successful advertising campaign usually
causes an increase in price.
An increase in supply when a new business opens usually causes a fall in price.…read more

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Lower prices, if prices continue to rise, it will increase inflation
Economic growth, producing more goods and services each year so there is a higher
standard of living
The government can change the way businesses work and influence the economy either
by passing laws
Extra government spending or lower taxes can result in more demand in the
economy and lead to higher output and employment.
Governments can pass legislation protecting consumers and workers or restricting
where businesses can build new premises.…read more

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Economic activity is the amount of production taking place.
Over time, the level of economic activity in a country tends to move up and
down/fluctuates in a business cycle.
In a downturn or slump output falls and many businesses shed staff because
sales are falling. The economy experiences recession.
In an upturn or boom, businesses increase output and hire more staff to keep
up with extra demand. The economy experiences economic growth.…read more


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