Ch4 Production and division of labour

4.1 Type of good

A. Producer good and consumer good
B. Public good and private good

4.2 Type of production

A. Type of production
B. Relationship between different type of production

4.3 Division of labour

A. Type of division of labour
B. Advantage and disadvantage of division of labour

4.1 Type of good

A. Producer good and consumer good

l The producer good and consumer good is a classification method base on the
of the good.

Therefore,
l if the good is used in → producer good
l if the good is used in → consumer good

Note: the good can either be producer good or consumer good ONLY
(üproducer good→ û producer good)

Meaning of producer good and consumer good:

Producer good Used by producer, for further production
Consumer good Used by consumer, to satisfy consumer wants

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E.g./example
Identify the following item.
Item Producer good/
consumer good
Egg used by May to make a cake, which the cake is
then eaten by herself
Egg purchased by retailer, which then putted inside the
retailed store for sales
Things that we needed to note:
è ü / û resell in the market → producer
è ü / û resell in the market → consumer

Exercise:

1. Which of the following about consumer good is correct?

A. Products sold in retail store must be consumer good
B. If Ben is a customer on foods, then the things he bought will definitely be
consumer good
C. It can satisfy consumer wants
D. If the good is bought by producer, the good can also be consumer good

2. Joe is one of the owners of ABC restaurant. Recently, he purchased new coffee
beans and started to make coffee in the restaurant. Before he started selling the
coffee, he invites friends to have free drink.
(a) To Joe, is the coffee bean that used to serve his friend producer good?
Explain. (2 marks)
(b) To Joe, is the coffee bean that used to served customers producer good?
Explain. (2 marks)

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B. Public good and private good

The public good and private good is a classification method base on whether the good
is (競爭性) and (排他性).

Definition of private good and public good:

Private good Rival（競爭性）and excludable（排他性）
Public good Non rival and non excludable

Which,
Rival
→ one consumer will the total quantity available

Excludable
→ one consumption will affect other consumption (does not allow concurrent consumption)

Exercise:

1. Newton First Law is public good, as it is __, __.

A. non-rival, the law can be read by many people at the same time
B. non-rival, the number of written Newton First Law can increase by repeat
writing
C. non-excludable, it enables concurrent consumption
D. non-excludable, the Law exist whenever there are people using it or not

2. To provide the free broadcast services, the service providers have to bear the cost
of maintenance of the lunch stations.
(a) Is the free broadcast a public good? Explain. (3 marks)

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4.2 Type of production

A. Type of production

Type of production is the classification on of production.

There are 3 types of production,

1. Primary production: Production of
2. Secondary production: Production of
3. Tertiary production: Production of

Ø E.g./exercise
Identify which type(s) of production the firm is engaging in. Explain briefly.
=, ∵
Restaurant Secondary & Tertiary production
∵ produce food
∵ produce dining services
Factory

Power station

Fisherman

Ø What is it for?
l By distinguishing the type of production, and see their contribution to
and to the economy,
l we can hence know the importance of different type of production to the
employment and output of the economy.

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Ù Case 1: Contribution to employment.
l Data showing the percentage of workers engaged in different type of
production.
l Higher percentage of workers engaged in that industry represent it is more
important to employment in the economy.

Ø E.g./exercise
1. The following table shows the portion of employee to whole employment
population in different type of productions in 2016 and 2017.
2016 2017
primary production 5% 3%
secondary production 60% 57%
tertiary production 35% 40%

So, here we can draw conclusion from 2 different angles.

l Comparison among the % of different type of production
l Changes among 2 different years

Comparison among the % of different type of production:

In 2016,
Primary production -> 5%
Secondary production -> 60%
Tertiary production -> 35%

∴ Primary production least important to employment

Secondary more important than primary production
Tertiary the most important to employment

Changes among 2 different years

For primary production,
2016 = 5% -> 2017 = 3%
∴ Primary production become less important to employment.

For secondary production,

2016 = 60% -> 2017 = 57%
∴ Secondary production become less important to employment.

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 For tertiary production,
2016 = 35% -> 2017 = 40%
∴ Tertiary production become more important to employment.

Ù Case 2: contribution to GDP. (output)

l Data shows the percentage of GDP taken up by different type of
production.
l Higher percentage of GDP taken up implies the production is more
important to the output of economy

Ø E.g./exercise
1. The above graphs show the contribution of each type of production
to the GDP of Country A in 2019 and 2020.
2019 2020

So, here we can draw conclusion from 2 different angles.

l Comparison among the % of different type of production
l Changes among 2 different years

Comparison among the % of different type of production:

In 2019,
Primary production -> 9%
Secondary production -> 50%
Tertiary production -> 41%

∴ Primary production least important to GDP(output)

Secondary more important than primary production
Tertiary the most important to GDP(output)

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 Changes among 2 different years
For primary production,
2019 = 9% -> 2020 = 5%
∴ Primary production become less important to GDP(output)

For secondary production,

2019 = 50% -> 2020 = 40%
∴ Secondary production become less important to GDP(output)

For tertiary production,

2019 = 41% -> 2020 = 55%
∴ Tertiary production become more important to GDP(output)

Exercise:

1. The following graphs shown the portion of employee to whole employment

population in different type of productions in 2016 and 2017.

According to the above information,

A. more people enrolled in the primary sector in 2017, if the population has been
doubled
B. the portion of employee in secondary and tertiary industry have both increased
C. the relatively importance of tertiary sector to the economy in 2017 has dropped
D. the number of people enrolled in the tertiary industry may have increase in 2017

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2. The above graphs show the contribution of each type of production to the GDP
of Country A in 2019 and 2020.
2019 2020

In the above period,

A. Higher portion of employee are employed by the tertiary sector in the
economy
B. The contribution of GDP from the tertiary sector increases
C. The contribution of primary sector to the GDP will increase if the GDP has
increase by a half in 2020.
D. The relative importance of tertiary production to the contribution of GDP
increase

B. Relationship between different type of production

l The relationship refers to the how different type of production helps the other
type of production.
l They help by their produced.

Therefore,
Primary production -> provides _______________
Secondary production -> provides _________________
Tertiary production -> provides __________________

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Exercise:

1. The following graph shows the relationship between the three type of production.

Y
X

What do X and Y stand for respectively?

A. Capital, land
B. Producer good, raw material
C. Consumer good, raw material
D. Raw material, capital

4.3 Division of labour

Division of labour（分工）means specialization（專門化）of .

i.e. labours are divided into different working procedure/occupation, etc.

A. Type of division of labour

There are 3 types of division of labour:

1. Simple
2. Complex
3. Regional

Which,
Simple = Specialises in producing a particular .

E.g. some people specialized in producing car and some people specialized
in producing orange.
Complex = Specialises in a particular production__ __ or

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 _ _ in a production.

E.g. In the production of car,

Some people specialize in painting, some people specialize in producing
wheel
Regional = Different region specialized in producing different ______________.

E.g. Yuen Long specialized in farming, Central specialized in fishing.

Exercise:
Identify the following type of division of labour. Explain briefly.
Situations Type of division of labour, ∵
In a restaurant, chef cook, while waiters
serve customer

Tom specialized in producing apple,

Sam specialized in producing banana

Country A specialize in producing food,

while Country B specialize in producing
clothing

B. Advantage and disadvantage of division of labour

Division of labour will lead to advantages and disadvantages to different .

Advantage of division of labour:

To individual:
→ can focus on the job they ________________.

To firm:
∵ Workers specialized in one production stage/role. (for complex division of labour)
→ Each worker _____________ hold tools from his assigned stage/role.
→ ______________ tools
&
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→ Only need to train the workers about their assigned work
→ Save training _____________________
∴ Division of labour can save _________________________

To firm & society:

∵ Workers have different talent &
∵ Practise makes perfect &
∵ Save time travelling among different tasks

∴ Division of labour can raise productivity

Disadvantage of division of labour:

To individual:
∵ Only focus on the assigned task after specialization
∴ ________________ to become unemployed

To firm:
∵ The production of a good is separated into ____________ stages.
→ When a stage is disrupted, other stages are forced to __________________
∴ ________________ to have disruption and delay

To society:
∵ Workers ONLY know a __________ of the production
→ ______________ people know the whole production process
→ _____________ of craftsmanship

Conclusion on the advantage and disadvantage of division of labour:

Advantage: Disadvantage:
l Save production cost l Increase chances of
(Gain to firm) unemployment
(Loss to individual)
l Increase in productivity
(Gain to film/society) l Loss of craftsmanship
(Loss to society)

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Exercise:

1. In the story, “Hunger game”, the nation is divided into 12 districts, different
district is responsible for different production. For example, District 8 is
responsible on the provision of textile and District 12 is responsible for the
provision of coal.
(a) What economic principle is illustrated in the above case? Explain. (2 marks)
(b) List ONE reason why the above case may raise labour productivity and ONE
reason why it may reduce labour productivity. (2 marks)

2. In a hospital, there is doctor, nurse and receptionists.

What economic principle is illustrated in the above case? List THREE reasons that
why it can raise productivity. (4 marks)

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