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Define derived demand
The demand for raw materials needed to produce goods and services
What does the demand of factors of production depend on:
Cost
Availability (quantity)
Productivity
What are the 4 factors of production ?
Land (natural resources)
Labour (the physical labour)
Capital (tools used to produce other goods)
Enterprise (risk takers that know how to organise 3 other factors to make profit)
Define labour intensive production
The cost of labour is proportionally higher than the cost of other factors of production
Define capital intensive production
The cost of capital is more prominent than any other factors of production
What are the methods used by firms to choose between capital and labour intensive production?
The cost of labour compared to the cost of capital
The size of the market
The firm’s objective (profit maximisers = capital production, operate on a smaller scale = labour intensive production)
Give 2 advantages of capital intensive production:
Enables firm to use mass production techniques to lower cost per unit
Reduces human error
Give 2 disadvantages of capital intensive production:
Involve huge set-up costs
Any breakdowns will cause major problems for business
Give 2 advantages of labour intensive production:
Highly skilled workers = good quality products
More flexible as each workers can specialise in different areas
Give 2 disadvantages of labour intensive production:
Expensive cost of hiring employees
Increase the price of goods and services
Define production
The total output of goods and services in the production process
Define productivity
A measure of efficiency found by calculating the amount of output per unit of input
What is production?
Factors of production + productivity (efficiency) = production
State 4 importance of higher productivity
Economic growth
Higher profits
Economies of scale
Improved competitiveness
Factors influencing the rate of productivity growth:
Competition
Innovation
Skills and experience
Entrepreneurial spirit
Note
Flashcard