Production, costs and revenue. Chapter 3 revision notes

  • Created by: Nathan890
  • Created on: 15-11-16 11:08

Production

Production- This turns factors of production into outputs of goods and services.

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Productivity

Productivity- is the output per unit of input.

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Labour Productivity

Labour productivity- output per worker

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Capital productivity

Capital productivity- output per unit of capital.

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Productivity gap

Productivity gap- is the difference between labour productivity in the UK and other developed economies.

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Specialisation

Specialisation- this is when a worker performs a few tasks or one specific task.

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Division of labour

Divisions of labour- This is when different workers perform different tasks in the course of producing a good or service.

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Trade and exchange

Trade- the buying and selling of goods and services.

Exchange-  this is getting something in return for another thing.

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Short run and Long run

Short run-  this is when at least one factor of production is fixed. It can not be varied.

Long run- This is different, because this occurs when all factors of production are not fixed; they can be varied.

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Fixed and variable costs

Fixed costs- these do not change in when depending on the level of output of production. For example rent.

Variable costs- These costs of production change with the amount a company produces of a good or service.

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LRAC

Long-run average costs, is the total cost divided by the output.

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Total revenue and Average revenue

Total revenue- all the money received from the sales of a good or service.

Average revenue-  total revenue divided by the output in a single-product firm.

Average revenue= total revenue/ output.

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Internal economies and diseconomies of scale

Internal economies and diseconomies of scale- these occur when a firm grows and changes its scale and size. Which saves costs.

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Internal economies and diseconomies of scale

Internal economies and diseconomies of scale- these occur when a firm grows and changes its scale and size. Which saves costs.

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External economies of scale

External economies of scale- occur when a firm’s average Unit costs of production fall, but because of the growth of the industry or market.

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External diseconomies of scale

External diseconomies of scale- occur when the growth of the whole market is raising the average cost of all firms in the market.

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Profit

Profit is the difference between total sales revenue and the total cost of production.

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