Micro Topic 4: Production, Costs and Revenue

Examples of FIxed Costs

Rent

Salaries

Interest on Loans

Advertising

Business Rates

Examples of Variable Costs

Wages

Utility Bills

Raw Material Costs

Transport Costs

Equations of Costs?

Pros of Specialisation

Higher Output (more trade and growth)

Wider Range of Goods and Services

Greater Allocative Efficiency

Higher Productivity Through Better Use of Workers

Quality of Workers

Cons of Specialisation

Finite Resources

Changes in Fashion/Trends

De-Industrialisation

National Interdependence

Pros of Division of Labour

Workers Highly Productive

Specialist Capital for Workers

Lower Prices

Higher Quantity/Choice/Quality for Consumers

Cons of Division of Labour

Wokers Demotivated

Higher Worker Turnover

Risk of Long Term Unemployment

Highly Standardised Goods and Services

Internal Economies of Scale

Risk Bearing

Financial

Managerial

Technical

Marketing

Purchasing

External Economies of Scale

Better Transport Infrastructure

Component Suppliers Moving Closer

R+D Firms Move Closer

Diseconomies of Scale

Control

Communication

Coordination

Motivation

Returns to Scale

Increasing: %change in output > %change in input

Constant: %change in output = %change in input

Decreasing: %change in output < %change in input