The Market System & Business Economics ( ch. 13-16)

FoP

* capital


* enterprise
* land
* labour

easiest way for businesses to increase output

increase productivity

external benefits

positive spillover effects of consumption or production, which bring positive benefits to third parties

working capital

resources used up in production such as raw materials and components

fixed capital

stock of man-made resources such as machines and tools used to help make goods and services

how does land affect productivity

the quality of land varies, so fertilisers, pesticides, reclamation, genetically modified crops, drainage and irrigation are very important

how does labour affect productivity

the quality of human capital is important, so training, motivation, improved working practices and migration are very important

how does capitol affect productivity

improvements in productivity can mean that there are new technologies introduced, so in the primary sector, machinery can increase output and reduce waste

external benefits examples

* Education
* Healthcare
* Vaccinations

define external benefits

positive spillover effects of consumption or production, which bring positive benefits to third parties

external costs example

* resource depletion
* noise pollution
* air pollution
* water pollution
* overcrowding
* traffic congestion

private costs

costs of economic activity to individual firms

social costs

costs of economic activity to society as well as the individual or firm

private benefits

rewards to third parties of economic activity such as consumption or production

social benefits

benefits of economic activity to society as well as the individual or firm

how can a government reduce negative externalities

* Taxation
* Subsidies
* Fines
* Government regulation
* Pollution permits

two types of capital

* working capital
* fixed capiral

capital-intensive

relies more heavily on machinery, relative to labour

labour-intensive

production relies more heavily on labour, relative to machinery

entrepreneur

individuals who organize the other factors of production and risk their money in a business venture

production

process involving converting resources into goods or services

CELL stands for

capitol, enterprise, land, labour

primary sector includes

* agriculture
* fishing
* forestry
* mining and quarrying

primary sector

production involving the extraction of raw materials from the earth

secondary sector

production involving the processing of war materials into finished and semi-finished goods

industries in the tertiary sector

* commercial services
* financial services
* household services
* leisure services
* professional services
* transport services

tertiary sector

production of services in an economy.

why has the tertiary sector grown

* people prefer to spend income on services
* fierce competition
* countries becoming developed
* new technology

production

rate at which goods are produced and the amount produced in relation to the work, time and money needed to produce them

factors affective productivity

* land
* labour
* capitol

Division of labour

breaking down of the production process into small parts with each worker being allocated a specific task

Specialisation

Specialization is the production of a limited range of goods by individuals, firms, regions or countries

advantages of division of labour on workers

* focusing on one task allows to increased skill
* high skill means higher pay
* more job satisfaction with higher skills

disadvantages of division of labour on workers

* boring and repetitive work


* work of unemployment
* can have health implications (ie joint wear)
* job dissatisfaction

advantages of division of labour on firms

* efficiency improved
* more specialist tools are possible
* production time reduced
* organization easier

disadvantages of division of labour on firms

* poor-quality work with unmotivated workers
* problems occurring at one stage affect the whole production line
* loss of flexibility in the workspace

costs

expenses that must be met when getting up and running a business.

fixed costs

costs that don’t vary with levels of output, such as rent.

variable costs

costs that change when output levels change, such as raw materials

average cost formula

total cost/quantity produced

revenue formula

price \* quantity

profit formula

total revenue - total costs

define profit

difference between total revenue and total costs

how can a government remove negative externalities

* Taxation
* Subsidies
* Fines
* Government regulation
* Pollution permits

deindistrialisation

decline in manufactoring