Economics Section B

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Production and Productivity
Production - a process that involves converting raw materials into goods and services. Productivity - output per period/ number of emplyees
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Factors of production
Land: Raw Land, Renewable & Non- renewable, Labour: Workforce & Human Capital, Capital:Working Capital & Fixed Capital, Entrepreneur
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An individual who organizes the other three factors of production, who is responsible for setting up and running the business. Is a risk - taker
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Labour Intensive Production
Advantages: Personal touch, uniqueness, flexible Disadvantages: Relatively expensive, inefficient, labour relation problems and shortage of skills
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Capital Intensive Production
Advantages: Efficient, Greater Speed, No labour shortages, Accurate production. Disadvantages: Initial high costs, Lacks flexibility, Lacks initiative
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Primary Sector
Involves extracting raw materials from the Earth: Forestry, Agriculture, Fishing, Coal Mining
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Secondary Sector
Involves converting raw materials into finished or semi - finished goods: Manufacturing, processing and construction
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Tertiary Sector
Involves the provision of services: Supermarkets,transportation, leagal advice
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The decline in the secondary sector to the tertiary sector. This may be due to change in consumer demands, competition , Developing countries tend to have an increase in the public sector, Advances in technology.
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Developed countries and Developing Countries
Developed economies = primary sector is nowhere as important as the territory sector. However, in developing countries secondary sector is growing with some expansion on the tertiary sector.
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Fixed Costs
Fixed Costs - costs that do not vary with an increase in the level of output: rent, business rates, advertising.
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Variable Costs
Fixed Costs - costs that vary with an increase in the level of output: raw materials, packaging, fuel and labour
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Total Costs
Total Cost = Fixed Costs + Variable Costs
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Average Costs
Total Cost/Quantity produced, cost of producing a single unit of output
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Total Revenue
Price* Quantity
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Total revenue - total cost
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Economies of Scale
Big firms usually produce more goods cheaply. Size has an effect on average costs of production. As a firm increases it size its average cost falls (due to economies of scale.) Later Diseconomies of scales takes place if it exceeds the MES.
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Internal Economies of scale
Cost benefits that an individual firm enjoys;
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Bulk Ordering, large amounts at cheaper raters, they get discounts for buying more.
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A large company will get more sales from marketing and find it more cost effective to operate on their own.
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More specialisation and invesment in capital, more efficient use of a resource than a smaller firm
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Larger firms are more credible, larger sources to choose from. Large amounts of loans make the firms more attractive.
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They can afford specialist managers, means more efficent.
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Wide range of markets into a wide range of markets, more investments means more R&D. They gain a competitive edge.
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External Economies of Scale
Falling average costs helps the industry grow as a whole: Skilled labour, Infrastructure,Ancillary and commercial services, Co-operation.
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Diseconomies of Scale
Bureaucracy- too many resources are being used in administration. Labour Relations - relations between workers and managers may worsen, resources wasted in solving conflicts. Control and Co-ordination- hard to control, more workers means more costs
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Productivity of Land
Fertilisers and pesticides, Irrigation, Drainage, GMO.
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Labour Productivity
Total output/ no. of workers, Education and training, improving motivation (Job rotation, Team - working, Empowerment) Improve working pratices
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Capital Productivity
Technological aid and new machinary
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A cost that society pays or benefits from in which they do not have a hand in
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Job creation, Training and education, R & D, New technology, Site development
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Noise pollution, Water & air pollution, Traffic congestion, Resource depletion, over crowding
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Social cost and Benefit
Private (Users) cost/benefit + External (Users) cost/benefit
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Other cards in this set

Card 2


Factors of production


Land: Raw Land, Renewable & Non- renewable, Labour: Workforce & Human Capital, Capital:Working Capital & Fixed Capital, Entrepreneur

Card 3




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Card 4


Labour Intensive Production


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Card 5


Capital Intensive Production


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