Production, costs and revenue. Chapter 3 revision notes

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

Productivity- is the output per unit of input.

Labour productivity- output per worker

Capital productivity- output per unit of capital.

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

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

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

Trade- the buying and selling of goods and services.

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

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.

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.

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

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.

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

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

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.

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

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