PRODUCTION

Factors of production:

Labour.

Land.

Capital.

Definition:
Activity designed to satisfy peoples wants.  The making up of goods and services.  We need the factors of production to make them.


Aim of firms:
Maximize profit.  Be efficient and reduce their costs of production.


Types of industry:


Primary: Produce food and raw materials.

Secondary: Use materials to make products like cars.

Tertiary: distributes to people the things the primary and secondary sector have produced and also provides services.

Types of production:
 Individual:

produce own products.

Specialized: specialize in one particular good.

Division of labor:


The result is the increased of production. More goods and services can be produced.

Factors which entrepreneurs use to produce more:

Factor: What they should do: Production: they want to Employ more labour produce more. Time: they want to do it faster. Hiring more labour.

There are three types of costs which firms pay.

 Fixed: cost which cant change.

Variable: cost which change.  Total: fixed cost + variable cost.



Graph: Profit and Loss (schedule)

Profit Break-even point. TC TR

FC VC

Loss

Quantity

How can we find profit and loss?

Profit = Total Revenue Total Costs; area after the break-even point. break Loss: area under the break-even point. break

Whats the break-even point? breakA

point where the break even quantity equals the break even cost. After this point you have benefits. Before this point you have loss.

Large scale production.

An entrepreneur can increase output by:  Reorganizing the workforce.
 Employing  Employing

more labour.

more of all factors of production.

How big should a firm be?

 Best

size or optimum size.

 Reduce

the average costs to their lowest point in the long run.

Advantages of large scale production:



More assets than a small firm. such low risk borrowers.

 Represent  Is

able to buy in large quantities. to employ specialists to work.

 Afford

Disadvantage of large scale production.



It becomes too large and can cause inefficiency: diseconomies of scale.

THE END!