Firms and Production: Changes in Demand for Factors of Production

A set of vocabulary flashcards based on Cambridge IGCSE Economics Chapter 21, defining key terms related to factors of production, demand for capital and land, labor vs capital intensity, and productivity.

Productivity

The output generated per worker or per factor of production.

Production

The total amount of output produced by a firm or factor of production.

Substitute factors of production

Factors of production where a rise in productivity or a fall in cost of one factor leads to the replacement of another factor.

Complementary factors of production

Factors of production where a fall in the price or a rise in the productivity of one factor increases the employment of all related factors.

Fixed factor of production

A factor of production whose quantity cannot be altered quickly in the short run, such as the size of a factory or office building.

Average product of labour

The total output produced divided by the number of workers, representing productivity per worker.

Corporation tax

A tax levied on the profits of a company.

Global water demand trend

Global water use that has increased $6 \times$ over the past one hundred years and is predicted to double again by $2050$.

Global service sector output share (2016)

The proportion of global output generated by the service sector in $2016$, which equaled $63\%$.

Labour-intensive production

A production method relying more on labour than capital, used when labour is abundant and cheap, or to create custom-made, high-quality, or flexible output.

Capital-intensive production

A production method relying heavily on machinery and technology to produce standardized output at lower average costs without human error or fatigue.

Technical economies

The ability of capital goods to produce a higher volume of products at a lower average cost.

Demand for land in city centres

High demand for city centre locations driven by high potential productivity and customer footfall, which increases competition and drives up rental prices.

Impact of unemployment on productivity

A scenario where productivity can rise while total production falls, because the most skilled workers are retained during workforce reductions.