Production
LO: Production converts inputs, or the services of factors of production such as capital
and labour
• Production is the process whereby scarce resources inputs e.g. raw materials,
and the factors of production are combined and converted into final output
• Three industrial sectors
o Primary sector – acquiring raw materials e.g. farming, mining
o Secondary sector – manufacturing, assembly e.g. factories
o Tertiary sector – distribution, selling e.g. markets
o E.g. of large firm is Shell
o E.g. of small firm are farm shops
• Graph shows % shares of employment in each industrial sector
90
80
70
60
50
40
30
20
10
0
1966 1979 1990 2006 2016
Primary Secondary Tertiary
_________________________________________________________________________________
LO: The meaning of productivity, including labour productivity
• Productivity – the amount of output produced by a factor of production in a given
time
• Productive efficiency – when it is not possible to produce any more of one good
without producing less of another
• Another meaning – when production takes place at the lowest average cost
• A long run average cost
curve is used to show this:
, • A LRAC diagram can also compare two firms: one that is productively efficient,
and one that is productively inefficient
• C1Q1 – productively efficient
• C2Q2 – productively inefficient
• Competitiveness – the capability to achieve profitability in the market in relation
to its competitors
• Theres two ways in which firms can compete:
o Trying to have more sales and revenue than other firms
o The ability to compete for consumers
_________________________________________________________________________________
Specialisation and the Division of Labour
LO: Why specialisation necessitates an efficient means of exchanging goods and
services, such as the use of money as a medium of exchange
• Specialisation – the production of a limited range of goods and services by an
individual, firm or country, in co-operation with others, so that together, a
complete range of goods and services is produced
• E.g. Blackburn used to specialise in cotton
• In order for specialisation to work, there must be an efficient means of exchange
of goods and services e.g. money
• Barter doesn’t work since it relies on the double coincidence of wants (both
sides must want what the other is offering)
• Specialisation may occur between nations (German cars) and within regions
(Lancashire and cotton)
• Between individuals, this is known as the Division of Labour
• Division of Labour – dividing a production process into a number of identifiable
tasks in order to increase productivity
LO: Production converts inputs, or the services of factors of production such as capital
and labour
• Production is the process whereby scarce resources inputs e.g. raw materials,
and the factors of production are combined and converted into final output
• Three industrial sectors
o Primary sector – acquiring raw materials e.g. farming, mining
o Secondary sector – manufacturing, assembly e.g. factories
o Tertiary sector – distribution, selling e.g. markets
o E.g. of large firm is Shell
o E.g. of small firm are farm shops
• Graph shows % shares of employment in each industrial sector
90
80
70
60
50
40
30
20
10
0
1966 1979 1990 2006 2016
Primary Secondary Tertiary
_________________________________________________________________________________
LO: The meaning of productivity, including labour productivity
• Productivity – the amount of output produced by a factor of production in a given
time
• Productive efficiency – when it is not possible to produce any more of one good
without producing less of another
• Another meaning – when production takes place at the lowest average cost
• A long run average cost
curve is used to show this:
, • A LRAC diagram can also compare two firms: one that is productively efficient,
and one that is productively inefficient
• C1Q1 – productively efficient
• C2Q2 – productively inefficient
• Competitiveness – the capability to achieve profitability in the market in relation
to its competitors
• Theres two ways in which firms can compete:
o Trying to have more sales and revenue than other firms
o The ability to compete for consumers
_________________________________________________________________________________
Specialisation and the Division of Labour
LO: Why specialisation necessitates an efficient means of exchanging goods and
services, such as the use of money as a medium of exchange
• Specialisation – the production of a limited range of goods and services by an
individual, firm or country, in co-operation with others, so that together, a
complete range of goods and services is produced
• E.g. Blackburn used to specialise in cotton
• In order for specialisation to work, there must be an efficient means of exchange
of goods and services e.g. money
• Barter doesn’t work since it relies on the double coincidence of wants (both
sides must want what the other is offering)
• Specialisation may occur between nations (German cars) and within regions
(Lancashire and cotton)
• Between individuals, this is known as the Division of Labour
• Division of Labour – dividing a production process into a number of identifiable
tasks in order to increase productivity
