Efficiency and Productivity - Optimal Mix of Resources

Flashcards covering concepts of capacity utilisation, factors of production, capital vs. labour intensive production, and the factors influencing the choice of production method, based on Tuesday 7th January lecture notes.

What is an index number used for in business calculations?

To compare values, often across different years, using percentages.

What are the four main factors of production (inputs) used by a business?

Land, Labour, Capital, and Enterprise.

What is the primary characteristic of capital intensive production?

It involves a significant investment in machinery and technology rather than human labour, as seen in car manufacturing.

What is the primary characteristic of labour intensive production?

It relies more on human workers than on machinery, typical in sectors like restaurants.

Why might large-scale or mass production favor capital intensive methods?

Capital equipment often provides more consistent output and efficiency for producing products in vast quantities.

When might labour intensive production be more suitable for product customization?

When products are specifically designed for individual consumers or require bespoke attention (job production), making the skill of labour more important.

In what types of businesses are the skills of workers a critical factor leading to labour intensive production?

Businesses that heavily depend on the specific skills of their workers, such as hairdressers.

How do relative costs of labour and capital in regions like Western Europe influence production method choices?

High labour costs in Western Europe often incentivize businesses to replace expensive labour with more cost-effective capital equipment.

How might the availability of cheap labour in countries like China or India influence production methods?

Cheap labour in these regions can make labour intensive production a more economically viable option, especially if capital equipment is expensive or unreliable.

How does the size and financial position of a business impact its choice between capital and labour intensive production?

Smaller businesses with cash-flow difficulties might opt for labour intensive methods because capital equipment is expensive to acquire; larger, financially stable businesses can afford capital investment.

For what type of product is capital intensive production often most effective?

Highly standardized products that can be produced in vast quantities at low unit costs using machinery.

Why might a service that requires personal contact or interaction favor labour intensive methods?

Customers often prefer the sociable nature, personal contact, and direct interaction provided by human workers in services like banking or personal care.